News Flash

EU: Job growth rate slows

Although overall employment levels across the EU rose by 1.5% over the year to Q4 2017, there were signs of a declining momentum in job growth. The change between Q3 and Q4 were highest in Malta (+1.8%), Estonia (+1.6%) and Finland (+1.2%) – but there were significant declines in Italy and Poland (both -0.3%).

Germany: DHL make pay offer

The communications company Deutsche Post/DHL, in negotiations with the trade union Verdi, has offered a two-year wage deal for its 130,000 German employees. The offer consists of a 3% increase in basic rates from October 1st 2018 and a further 2.1% in October 2019. On top of this, there is a further on-off flat rate payment of €250 (US$308), plus extra annual leave (or money in compensation for untaken additional days off). The union will be consulting its members about the proposed changes, but had made demands for a 6% rise this year.

Comment: The fallacy of talent

There are few subjects that attract bigger audiences to HR conferences than talent management. In many ways, the modern HR professional defines their reason for existence by the acquisition, development and retention of highly talented individuals – because that is why line managers principally value their services.

Line managers do not value HR colleagues because they act as the conscience of the organisation, operate a whistleblower helpline, investigate complaints about sexual harassment or seek to keep the company legally compliant. The HR department is principally there to devote time to what line managers do not have enough time to do. In the course of satisfying this need, HR can so readily cloud its role with mystifying jargon about “human capital”, and even “talentship”.

In steps the HR guru. At the heart of their “ground breaking insights” are a set of well – trodden rules of thumb dressed up in dignifying language and intended to make the “insights” more, rather than less, opaque. The conference attendee clings to each of the guru’s words trying to learn the nuggets of know – how that will give them the key to improve the human capital pool. But what they get is a greater sense of confusion through interstellar concepts and needless complexity. For instance, in one popular text in this field “Beyond HR: The New Science of Human Capital” the authors talk about how HR can generate worth for client groups by using the language of the group – marketing language for marketeers, finance language for accountants and production concepts for factory managers. But doing this does not add one iota of actual value to the process – other than making HR seem more in tune with their client’s world.

Underlying this resurgent interest in talent management is also a fear that in an increasingly competitive world the small pool of available talent will be drained away and companies stumble around with inferior talents. But here is where two other fallacies creep in. That the world relies on a small group of super-intelligent people who are in short supply and that this pool of high talent will always serve the interests of the company where it functions.

The ‘talent elite’ notion is backed up by a plethora of job evaluation techniques, intelligence testing and organisation charts that all dictate that merit gets to the top and (not coincidentally) so do the great bulk of material rewards. Seemingly objective phenomena labelled “talent” and the achievement of a hallowed place on the organisation chart all prop up the reward system and those already gaining advantage from this system would, of course, not have it otherwise. But one does not have to espouse a socialist ethic to challenge these self – perpetuating fallacies. Moreover, it has become all too evident from business failures that the most talent – rich organisations are not necessarilythe most stable or successful.

Another reason why the “small talent pool” concept is so difficult to accept is that it is reinforced by assumptions concerning academic achievement. If Masters and PhDs were the emblems of true talent, then academics would run private sector corporations. All of us know, however, that this would be a recipe for disaster. In just the same way that it is questionable why MBAs are so respected when if the University professor who taught them was any good at management they would surely be a  manager and not an academic. In many ways the study of business in academia is not just sometimes an irrelevance, but potentially a damaging irrelevance.

That is not to say that education per se is not a benefit to the economy. But what value it truly brings is more in the manner that it is regarded in countries such as South Korea – where 80% of the 20-35 generation now have tertiary education. In such a context, the possession of qualifications becomes a necessary, but not sufficient step to having a worthwhile job. Huge salary gaps are also not essential to achieve business success.

The gap between the boardroom and average worker in Scandinavian companies, for instance, is very narrow by western standards and in – in any case – progressive taxation systems narrow any gaps which exist. Rather than pay the national exchequer hard won wealth it would be of greater value for a company to spread it around the workforce in a more even way, or reinvest it in new technologies or management methods. But very few people on high salaries are going to espouse such a cause. For them a career has been measured in terms of securing high base salaries, big bonuses and a top hat pension. Why should this change? Even if it was in the interest of the company and its loyal shareholders?

So whatever the latest textbook or conference guru says, the measure of a business’s success is not in ornate conceptual systems that obscure the truth, but in widening the concept of talent to embrace all employees; in improving employee involvement and in making everyone a key and valued contributor – as well as an ambassador of the organisation.

Getting this message across to line managers is a tough challenge, but maybe it is not them, but weight of circumstance and persistence that will ultimately achieve the high ground. If “strategy” means anything in an HR context it will be as a servant to the greater good and putting a constant emphasis on issues such as legal compliance and enhancing key, future skills that will ultimately make all the difference


Comment: The new political morality

What modern US Presidents have learnt from the social media age is that both well-drafted laws and brute force have less political clout than fighting moral turpitude – and that moral life is not built on the continuum of right and wrong, but on a twitter-fed culture of inclusion and exclusion. Being seen to be good courageously in a secular way is a new inclusive path to a ‘command morality’ and seizing the high ground that other regimes have so much under-rated. It is also great for the tax exchequer too. Enter left – US Executive Order 13818.

This document came into force at the end of December 2017 and builds on the GLOMAG initiative introduced by President Obama. It applies to all individuals who, and companies that, have been involved in human rights abuses or corruption anywhere in the world – plus all those who have, in any way, dealt with them. It now applies to 52 individuals and entities that collectively have huge networks of business interests covering such crimes as widescale traffic in illegal arms to war zones, forced removal of human organs and corrupt mining deals in the Congo. It also applies to current or former government officials, most commonly found in rogue or failed states.

No court action is necessary for inclusion on the GLOMAG list and the consequences of inclusion on it include the blocking of assets, visa blacklisting and a ban on all transactions by US companies, citizens and residents with the designated persons or entities.

Further concern for foreign companies that have entities in the USA arises from recent tax reforms. Foreign companies could well face a significant increase in tax liability due to new anti-avoidance measures. This is linked to measures countering ”base erosion”, “earnings stripping” and tax loopholes previously open to “expatriated entities”. Transfer pricing rules are being tightened and interest paid to entities with a 25%+ equity stake held abroad maybe subject to base erosion and anti-abuse tax penalties.The treatment of third-party debt is also likely to require careful attention when calculating US tax liability.

Now is the time for multinationals to get to know their suppliers and customers and the real use made of their goods and services. It is also necessary to review all business and financial interests in the USA and to consider alternative trading arrangements.

South Africa: Minimum wage in May

The incoming President Cyril Ramaphosa has announced that the long awaited national minimum wage will be introduced on May 1st this year. The new rate for most employers will be R20 (US$1.72) an hour. Its introduction and adoption will lift six million workers above the poverty line.

Nigeria: African Trumpanomics

An executive order prohibiting the issue of visas for foreign workers to obtain jobs that Nigerians may equally undertake has just signed by President Muhammadu Buhari. The order also states that procuring authorities shall give preference to Nigerian companies and firms in the award of contracts – especially in the field of science, technology and engineering projects.

Comment: False fraud

When posting workers to another EU country employers should beware of failures on behalf of the social security authority in the posting country, as this will allow the host country authorities to declare that E101 social security certificates are fraudulent and disregard them. In a case before the ECJ, Bulgarian companies had posted workers to work on a Belgian construction site. Belgian authorities are invariably suspicious of workers posted from Eastern Europe and made enquiries with the Bulgarian social security authority – that failed to respond. The court also judged, perhaps wrongly, that the posting companies were just “paper entities”. The Belgian Company and its top executives, were therefore found guilty of fraud and other charges relating to the posting, even though they simply relied on documents they believed to be genuine. This is especially of concern as it would appear that there was no evidence whatsoever that the E101 certificates were forged (Case C-359/16).

Canada: Single status on horizon

Employers in Ontario will soon not be able to differentiate between the hourly pay of workers because they are part-time, seasonal, temporary, casual or supplied by work agencies. From April 1st 2018 they will need to ensure that any pay differences are justified purely due to differences in skill, responsibility or working conditions.

Chile: Battle lines drawn

The Santiago Court of Appeals has overruled the labour inspectorate by declaring that any group of workers may sign a collective agreement with their employer. It is not necessary that the agreement be signed by a trades union. This is the latest move in a saga that began with a Bill Approved by Congress in April 2016. This sought to give unions exclusivity when concluding collective agreements. But the Bill was stuck down by the Constitutional Court. The government still went ahead with enacting the new law, but it was only a matter of time before the court’s defence of absolute human rights would run up against the politicians’ love affair with the union movement.

China: Open door for experts

“High-end foreign talent” such as technology leaders, entrepreneurs and scientists from in-demand sectors now will be able to apply long-term visas that are valid for between 5 and 10 years. The move comes after Chinese Premier Li Keqiang said in September that China’s restructuring required a more open policy towards the importation of foreign expertise.

Comment: A legal qualification for HR

Why is it that even though companies invest heavily in HR systems they still find themselves suffering from legal compliance or HR standards problems? Surely, having an ERP or HR Service Delivery system in place and using its powerful, easy to use tools to customise and streamline HR processes must be all it takes to produce a smart HR function?

The answer is that however commendable such systems are they still rely a great deal on an employer having policies in place that are appropriate, practical, up to date and lawful. OK, systems providers do a lot to ensure that they do not break key statutory requirements, but the problem is that laws require constant interpretation and reinterpretation, case law tumbles out of courts each day to modify confidently held positions and not all laws are logical or amount to refined common sense. It is also one thing to understand a legal obligation and quite another to be aware of how much it is enforced in the jurisdiction concerned.

It is a little known phenomenon that the more complex and ornate a country’s laws are, the less its laws will generally be enforced. Moreover, because many line managers are not aware of their legal obligations – or just do not think that they can be found out – their organisation is only as strong as its weakest

human link. Another fact is that a failure to achieve compliance will undermine the whole structure of an HR system. That is why Employment lawyers are part of a multibillion dollar business. Almost everyone gets it wrong sometimes – whatever their investments in HR process automation and sophisticated procedures.

Systems overconfidence make a company more vulnerable than if it did not have the colourful pie charts and whizz graphs – because the attractive overlay and sense of order it brings prevents people, who should know better, from seeing the tidal wave until it is about to hit them (and maybe not even then).

So what is the solution? It certainly is not in abandoning the systems that have replaced the heavily administrative approach necessary to run an old-style HR department. What is frequently lacking is the existence of ‘in-department’ legal expertise.

The company probably has its own in-house counsel – but they are often hard pressed to keep up with demands from other parts of the business and especially the increasing compliance burden imposed by anti-money laundering regulations. Only a few companies have the benefit of lawyers with expertise in employment law – or (more rarely) labour law. That is why it is necessary for HR to secure its own body of such expertise.

Many HR departments already have at least one individual who provides legal advice and maintains close relationships with in-house or external lawyers. The problem is that these professionals lack training and recognition – especially in multinational environments. The CIPD in the UK is establishing an ‘advanced award in employment law’, but this requires attendance at regular face-to face sessions, is expensive for what it provides and leaves the HR participant with only a better grasp of one jurisdiction. Even lawyers are generally only trained in a single jurisdiction and feel vulnerable when they are called to step very far out of it.

What multinational companies would therefore benefit from is a professionally recognised qualification leading to the creation of a new HR job function – the HR Counsel. This role is not that of a fully-fledged lawyer – nothing can replace them. But they will be equipped to understand a wide range of employment and labour laws, apply HR standards (such as those established by the ISO), maintain HR policies, monitor and advise on individual disputes, handle obligations like nonfinancial and gender equality reporting and interface with external lawyers in an effective and well-informed way.

That is why FedEE is currently in the process of registering ‘HR Counsel’ as a trademark and designing a part-time distance learning course heavily drawing on the data available in our knowledgebase. The focus of the course will be in applying legal developments and HR standards to a company’s own situation. A number of scenarios will be posed and how they are handled examined in the context of countries where the company has operations. This may be responding to a call to hold works council elections, dealing with a mass redundancy or handling individual disputes through the courts or an ADR approach.

This twelve month course will not only lead to a new qualification – “Qualified Profession HR Counsel” – but the new “HR Counsel” job role, which FedEE will promote as an essential component of a multinational’s group HR function. We anticipate not only that this position will become a career goal in itself, but also a logical stepping stone to the HR Director role.

Are you a graduate with five or more years experience in HR? Might you be interested in joining our pilot programme at a much reduced fee?  Then please contact our Membership Secretary for further details.

Comment: Why politics matter

The two subjects people are most commonly advised to avoid talking about at work are politics and religion.  Yet for multinational organisations both subjects cannot be totally ignored – especially the political situation in countries where they operate.

The conventional view of politics is to see it as a play between the left and right, with better outcomes for business coming from the ascendancy of the right. Yet from an operational perspective it is not that clear where the advantage always lies. In reality, the most significant dimension is not the left-right axis, but between democracy and totalitarianism (total dominance by the state). Both right and left extremes are inevitably totalitarian, that is why Hitler’s party was called “national socialism” even though it was as right wing as it would be possible to get.

In fact, business thrives most within liberal regimes and these are usually highly democratic. In the USA Republican policies are generally classified as “right wing”, but actually seek to minimise state interference, although state controls tend to be tight whoever is in power. It is just the edges of state control that move – and not its core.

In Europe there is currently a move towards totalitarianism, especially one dimension of it – greater intolerance of views that are opposed to the state. This has long been the situation in Russia, but now it is reappearing in Austria, Hungary and Poland. The clamp down in Poland is well illustrated by the decision of the media regulator to fine a U.S.-owned news broadcaster $415,000 recently over its coverage of opposition protests in parliament last year. Now the Polish government is legislating to take direct control over the judiciary and ignoring environmental protests over widescale deforestation. Poland could even eventually lose its EU voting rights if its judicial reforms go ahead.

One reason to care about the emergence of greater authoritarianism is that it undermines the principles enshrined in international law and, in the case of Poland, the EU Treaty. The EU, for instance, is significantly weakened by Brexit, but the collapse of democracy in central and eastern Europe will weaken it more. Multinational enterprises rely on stability and certain fundamental freedoms. Not so much humanitarian principles, but freedom of establishment and freedom to move capital and people across national borders. They also thrive on rising living standards and independent judiciary to deal fairly when things go wrong.

Another reason why HR should keep one eye fixed on political developments is because employees engage in political activities, the power of trades unions ebb and flow in relation to political events and the policies of political parties generate new laws and tax amendments. Although personal political affiliations are best kept close to the chest, political developments do clearly have either a positive or negative impact upon the business and can seriously alter employment costs, as well as inform future investments.

Argentina: Unpopular austerity measures

President Mauricio Macri has pushed through pension reforms amidst violent public protests. Amongst the controversial changes is the raising of the retirement age from 65 to 70 for men and from 60 to 63 for women. Plus new ways to calculate entitlements that would reduce fund costs.

Canada: family-friendly reforms

Changes have just been made to the federal maternity insurance system to allow for women who have premature births. The benefit is, however, still capped at 15 weeks. Parental benefits may now be taken at 33% of average normal pay over 61 weeks – as well as at a rate of 55% normal average pay for 35 weeks. Employees may also receive up to 15 weeks caregiving benefit in any 52-week period to tend to an adult family member with a terminal medical condition.

Japan/EU: Biggest trading bloc

The European Union and Japan have concluded a new economic union. This will establish the largest free trade area in the world. The main beneficiaries from the agreement are likely to be Japanese carmakers and European food and beverage producers. The deal will be signed next Summer and come into effect during 2019.