In response to prolonged recession, inApril 2010 the Croatian Government adopted an EconomicRecovery Program to safeguard macroeconomic stability andsupport faster recovery of the private sector. A centralelement of the program is revision of labor regulations tocreate a more dynamic labor market by ensuring labor forceflexibility and job security. The goal is to increase thelabor force participation rate and ensure that it has theskills and competencies required by the evolving and dynamicprivate sector. The Croatian Ministries of Finance and laborasked the World Bank for support in design of possible laborlegislation reform. The objective of this note is tobenchmark Croatia's legislation and help identify legalconstraints on achieving a more dynamic and flexible labormarket. Changes to employment protection legislation (EPL)can be politically difficult. They therefore need to bepreceded by a public information campaign explaining theirrationale and by dialogue with social partners. The centralmessage to be conveyed to the public is that relaxing themost rigid provisions of the labor law will eventually leadto better employment prospects, shorter spells ofunemployment, less informality, and higher productivity andultimately incomes. This involves moving from protectingjobs to protecting workers an idea known as flexicurity.
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