Business Removing

82 DOING BUSINESS IN 2005
imum duration of term contracts; and (iii) the ratio of the
mandated minimum wage (or apprentice wage, if available)
to the average value-added per working population. A country
is assigned a score of 1 if term contracts can only be used
for temporary tasks, and a score of 0 if term contracts can be
used for any task. A score of 1 is assigned if the duration of
term contracts is 3 years or less; 0.5 if the duration is between
3 and 5 years; and 0 if term contracts can last more than 5
years. Finally, a score of 1 is assigned if the ratio of minimum
wage to average value added per worker ratio is higher than
0.75; 0.67 for ratios between 0.50 and 0.75; 0.33 for ratios between
0.25 and 0.50; and a score of 0 if the ratio is below 0.25.
For example, term contracts are only allowed for temporary
tasks in Uruguay (a score of 1), but they can be longer than 5
years (a score of 0), and the ratio of the mandated minimum
wage to the value-added per worker in 0.10 (also a score of 0).
Averaging the three subindices and scaling the index to 100
gives Uruguay a score of 33.
The Rigidity of Hours index has 5 components: (i) whether
night work is restricted; (ii) whether weekend work is allowed;
(iii) whether the workweek consists of 51⁄2 days or
more; (iv) whether the workday can extend to 12 hours or
more (including overtime); and (v) whether the annual paid
vacation days are 21 days or less. If the answer to any of these
questions is no, the country is assigned a score of 1, otherwise
a score of 0 is assigned. For example, night work is not allowed
in Vietnam (a score of 1), weekend work is restricted (a
score of 1), the workday—with overtime—can extend to 12
hours (a score of 0), 6-day work weeks are allowed (a score of
0), and paid vacation is 16 days (a score of 0). The scores are
then summed and scaled to 100 to get to the final index of 40
for Vietnam.
The Difficulty of Firing index has 8 components:
(i) whether redundancy is not grounds for dismissal;
(ii) whether the employer needs to notify the labor union or
the labor ministry for firing 1 redundant worker; (iii)
whether the employer needs to notify the labor union or the
labor ministry for group dismissals; (iv) whether the employer
needs approval from the labor union or the labor ministry
for firing 1 redundant worker; (v) whether the employer
needs approval from the labor union or the labor ministry for
group dismissals; (vi) whether the law mandates training or
replacement prior to dismissal; (vii) whether priority rules
apply for dismissals; and (viii) whether priority rules apply
for reemployment. If the answer to any question is yes, a score
of 1 is assigned, otherwise a score of 0 is given. Questions (i)
and (iv), as the most restrictive regulations, have doubleweight
in the construction of the index. For example, an employer
in Brazil has to both notify (a score of 1) and seek approval
(a score of 2) from third parties when dismissing a
redundant worker, she has to both notify (a score of 1) and
seek approval (a score of 1) when dismissing a group of
workers, and redundancy is not considered a fair grounds for
dismissal (a score of 2). The law does not mandate priority
rules for dismissal (a score of 0) or reemployment (a score of
0), and there is no requirement for retraining or alternative
placement prior to dismissal (a score of 0). Adding up and
scaling to 100 gives the final index of 70 for Brazil.
The Cost of Firing indicator measures the cost of advance notice
requirements, severance payments and penalties due
when firing a worker, expressed in terms of weekly wages. For
example, in Cameroon an employer is required to give 16
weeks advance notice prior to a redundancy dismissal, the
severance pay for workers with 20 years of experience equals
7 months of wages, and redundancy is grounds for dismissal
so no penalty is levied. Altogether, the employer pays the
equivalent of 46 weeks of salary to dismiss the worker.
This methodology is originally developed in Botero and others
(forthcoming) and adopted with minor changes here.
Registering property
A business purchases land and a building in a peri-urban area
of the most populous city. Doing Business covers the full sequence
of procedures necessary to transfer the property title
from the seller to the buyer. Every required procedure is included,
whether it is the responsibility of the seller, the buyer,
or where it is required to be completed by a third party on
their behalf.
Local property lawyers and property registries provide information
on required procedures, as well as the time and the
cost to fulfill each of them. In most countries, the data are
based on responses by both lawyers and officials in the property
registries.
Assumptions about the business
To make the business comparable across countries, five assumptions
are employed. The business:
• Is a limited liability company.
• Is located in a peri-urban area of the country’s most populous
city.
• Is 100% domestically and privately owned (no foreign or
state ownership).
• Employs 50 employees, all of whom are nationals.
• Operates in general commercial activities.