The aim of this paper is twofold. Firstly, we try to assess the impact of the labour market reform in Spain. Twelve months after its approval, this reform, the sixth in the last 27 years, is not succeeding in reducing one of the greatest problems of the Spanish labour market, namely, the huge turnover of workers due to an excessive use of fixed-term contracts. Secondly, we compare the potential long-term effects of this reform to the alternative of introducing a single contract with severance payments that increase with seniority. We present a simulation exercise to assess the effects of these two systems on predicted mean severance costs and employment duration. Our main result is that, although producing similar aggregate firing costs, the single contract results in a substantial increase in average employment duration.

Key words: labour reform, temporary contracts, severance payments, single contract.
Clasificación JEL: J32, J63, J88.