ILPC 2026

 Abstract

The decline of stable and regular employment is seen as an unavoidable economic and institutional fact. The non-standard employment appears therefore as a widespread staffing solution adopted by firms to deal with uncertainty, market shocks, globalised market competition, reduction of labour costs, or as a screening tool to hire new employees. However, international evidence suggests flexible and stable contracts are complementary instead of substitutes. We follow this argument and examine the variety of contractual arrangements used by firms in Portugal. Portuguese labour market is characterised by strict employment protection legislation, but reforms have been implemented in the past years towards deregulation of employment legislation. We question whether flexible arrangements are the major option of firms? Is stable employment at risk of extinction? Which characteristics of firms are associated with flexible contracts? We draw on linked employer-employee data, Quadros de Pessoal for 2012, to obtain a typology of firms based on the different contractual arrangements they use. Additionally, we examine other firms’ characteristics associated with each type of firm. The sample comprises 35,450 firms with more than ten employees. Descriptive statistics corroborate that stable employment prevails and comprises 72.3% of contracts in firms in Portugal, and fixed-term is at the second option (26.5%). All other types of contracts show negligible figures. The two-step cluster analysis based on the proportion of each type of contract points to four types of firms, namely ‘very stable’, ‘stable’, ‘flexible’, and ‘very flexible’. In the former prevails open-end contracts, while in the later we found a mix of stable and different types of flexible arrangements. ‘Very flexible’ firms use open-end contracts, but also fixed-term with and without duration, and temporary agency workers. The ‘stable’ firms have more workers with open-end but use fixed-term, whereas ‘flexible’ have the opposite pattern, therein prevail fixed term contracts and open-end ones are negligible. The results indicate that small firms make large use of flexible arrangements and a significant proportion of medium and large firms hire employees on the basis of all types of flexible contracts. Flexibility also varies among industries. Our findings indicate that the ‘flexible’ firms prevail in service sector, whereas firms in the agriculture sector use the variety of flexible arrangements. In sum, the empirical results achieved so far corroborate our argument in that firms do not adopt one single solution. There is a convergence towards a variety of solutions between stable and flexible arrangements.