No. 1543 - How do firms use fixed-term contracts?
The paper examines the use of fixed-term employment contracts by Italian firms. The literature has identified three main purposes: coping with seasonal production cycles, screening workers prior to a permanent hire, and maintaining a flexible labour buffer to deal with uncertainty. Using administrative data on employment relations from 2013 to 2017, the analysis quantifies the relative importance of each of these objectives.
More than 85 per cent of temporary employment is generated by a small group of firms. Among these, one tenth use it to meet seasonal needs, concentrated in a few sectors, while one quarter offer long-term contracts to evaluate workers before hiring them on a permanent basis. The remaining two thirds of fixed-term contracts are used by less productive firms with more volatile revenues, which rely on this type of employment to be flexible in adjusting their workforce to the uncertain trajectory of their business activity.
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30 July 2026
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