We use the 2015 Italian Jobs Act as a natural experiment to study how reducing employment protection affects workers’ perceived job insecurity and actual job loss, search behaviour, and mobility. The reform eliminated reinstatement rights for unfair dismissals and introduced tenure-based severance pay, applying exclusively to new hires in large firms. Using Labour Force Survey data and matched employer–employee records, we implement a difference-in-differences

design combined with a sharp severance pay discontinuity at two years of tenure. We find that low-tenure workers hired under the new regime are 17% more likely to fear job loss. Consistent with these perceptions, their probability of being laid off increases by 2%. In response, they increase on-the-job search (+21%) and job-to-job mobility (+22–28%), particularly from low-paying sectors, where moves lead to higher wages. In high-paying sectors, workers instead raise effort (+3–5% days worked). All these effects disappear when severance pay increases by 50% after two years of tenure. Our findings highlight a central policy trade-off: while lower firing costs at low tenure levels foster mobility and labour market efficiency, they also increase job insecurity, calling for tenure-targeted unemployment insurance.