In a move aimed at increasing job security, Italy’s populist government approved a law yesterday that increases limits on temporary contracts and penalises firms that move production offshore.

The so-called ‘dignity decree’ still needs approval within the next 60 days by Parliament to become final.

The dignity decree was also aimed at bringing down Italy’s unemployment rate, which stood at 10.7% in May, the third-highest in the EU, according to Eurostat.

“With this decree we are seeking to demolish previous laws that increased job insecurity," Labour and Industry Minister and leader of the populist five-star movement Luigi Di Maio said. “We placed limits on the abuse of temporary contracts, and we increased penalties for unfair job dismissals.”

Di Maio, who during his campaign promised to stop the abuse of temporary contracts, also said that the decree contains measures to help those who work in the gig economy, which he says is an emblem of the precarious work he has vowed to erase.

The law increases costs for firms that use temporary contracts, and reduces the number of times they can be renewed to a maximum of two years from three. This move reverses the reforms introduced by the Legislative Decree no. 81 of 2015 (the “Jobs Act”) which extended temporary contracts to 36 months.

The decree was criticised by trade association Confesercenti.

“Changing the rules on temporary contracts is "a step backward" and may have "significant economic impact on businesses and negative fallout on employment," Confesercenti said in a statement. "It would be a hard blow to bear especially in the tourism and services sector, because the measure arrives when the summer season has already begun and will affect current contracts.”

“I think it’s a mistake, you don’t increase work by making the rules more rigid,” Vincenzo Boccia, head of industry lobby Confindustria, told Reuters.

ISTAT data showed that as of May 2018 there were least 3 million people on temporary work contracts and almost 15 million had permanent contracts.

The decree also includes penalties for domestic companies that benefit from state incentives and then relocate abroad. The businesses will be fined and asked to pay back any resources they may have received from the government. Furthermore, the decree also includes a ban on advertising of all forms of gambling, which Di Maio’s populist movement says hurts families’ finances and targets the weakest members of society.