News Flash

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.

UK: Mind the gap

A total of 372 employers employing 250+ workers have so far reported under the gender pay gap reporting obligations – a small fraction of those that must report by the April 2018 deadline. Although the Financial Times has recently reported that some figures are clearly false, our review finds the most surprising outcome so far is that the companies reporting early are clustered in sectors such as charities, consultancies and public sector bodies. Amongst the major companies reporting to date, the median gender pay gap is 14.5%. The highest gap is Easyjet (45.5%) and lowest Wesco Aircraft EMEA (1.5%).

South Africa: Extension of parental leave

The Labour Laws Amendment Bill has now passed through parliament and now awaits approval by the National Council of Provinces. This gives all couples the right to take parental leave if they adopt or use the services of a surrogate mother – and fathers to take up to 10 days paternity leave. The right would apply equally to “parents” who are LGBT.

Comment: Masks of normality

Although concern about disability is now well within the radar of most HR professionals, mental health problems remain an often neglected dot on the screen. One reason for this is that many psychological conditions are difficult to detect and the right to medical privacy means that those suffering from them are either under no obligation to declare them to their employer or prevented by their condition from doing so. Moreover, elements of some conditions – such as psychopathy and narcissism –  are actually fairly common characteristic of business success.

Most studies of psychopathic tendencies have taken place within medical or correctional institutions. However, psychologists Fritzon and Board have looked at the business environment and concluded that whilst about 1% of the general population meet the clinical criteria for psychopathy, the concentration rises to 3-4% amongst business executives.

But before running ahead to label colleagues in this way, it should be noted that to satisfy such a diagnosis a clinical psychologist would need to identify many related character traits – expertly brought together in the ‘Hare psychopathy checklist’. For instance, the psychopath is eternally confidant, cold hearted, self-centred, and uses fear rather than respect as a way to motivate others. They are masters of manipulation, deflection and deception and able to rationalize extreme behaviours. They are easily bored and are eternal novelty seekers, have short tempers, lie convincingly, mimic real emotional responses and are extremely adept at hiding their true natures. Most disturbingly for businesses, they have the capacity to take huge, unjustified risks – knowing that they would be able to deflect any blame that may come from failure.

But what should an HR professional do if they suspect that a colleague suffers from such a dangerous condition?  Usually inaction seems to be the only possible course of action.  Psychopathy is unlikely to be detected in periodic health checks by occupational physicians and whistleblowing laws will not protect an individual from reprisals if they confide their concerns to others who then leak it. The burden of proof is likely to be very high when the subject of concern is in a powerful position and adept at self-preservation. One important way that HR can respond, however, is not to become the instrument of deranged senior colleagues. The psychopath in a top position will need obedient lieutenants to assert their will across the organisation and there are all kinds of tactics that can be used to subtly frustrate decisions which may verge on illegality, ruin employee relations or risk the company’s reputation.

In the end, however, there will be no alternative for the able and principled HR professional other than to move on. Ironically, it may take a positive testament from the colleague in question to obtain the next position. So maybe the decision to move on should not be left too late.