We test the signalling hypothesis using detailed flow-based employer–employee data from Denmark. Our main findings are: the signalling value is proportional to the proportion of employees dismissed from the workplace and the signal is uniform across occupation groups.

We show that firms' practice of anonymous contracts ("one-size-fits-all") can be reconciled with standard agency theory if careers are marked by frequent transitions between employers, and agents have career concerns because complete long-term contracts are not feasible.