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IT 'stuffing', the lure of the West threatening sector health

As ideas on the best date for Slovak accession to the European Union are bandied between the German Chancellor and EC leaders, potentially one of the most important sectors of Slovak industry is bracing itself for an exodus of talented young professionals to EU states.
IT industries across central Europe, analysts say, are seeing the beginning of an exodus that is unlikely to change as Europe's giant economies, such as Germany's, implement plans to relax visas for workers in the country's e-business sectors. Already, the sector in Slovakia has begun to witness the kind of HR catastrophe that may befall other industries unless the government and businesses can entice the country's most talented workers to stay in the domestic market.


The brightest IT talents in Slovakia are looking to EU countries for higher wages and better opportunities.
photo: Spectator archives

As ideas on the best date for Slovak accession to the European Union are bandied between the German Chancellor and EC leaders, potentially one of the most important sectors of Slovak industry is bracing itself for an exodus of talented young professionals to EU states.

IT industries across central Europe, analysts say, are seeing the beginning of an exodus that is unlikely to change as Europe's giant economies, such as Germany's, implement plans to relax visas for workers in the country's e-business sectors. Already, the sector in Slovakia has begun to witness the kind of HR catastrophe that may befall other industries unless the government and businesses can entice the country's most talented workers to stay in the domestic market.

Peter Borak, Information Risk Manager at KPMG Slovakia, told The Slovak Spectator that many Slovak people in IT looked towards the West for a higher wage and greater recognition of their talents.

"The problem is that many young people are leaving Slovakia from the IT sector, to work in places like Austria. The people are IT educated enough to do it, and the salaries are much higher," he said.

Another development across central Europe that has further deepened the fears of a mass exodus is the 'Internet-stuffing' companies that are hawking their best employees across the EU to the highest bidder, filling the supply gap as demand for IT workers grows exponentially.

"So far, the dynamics in the IT labour market in central Europe have not shown so many huge numbers of people going abroad, but we are aware that this is changing," said Pawel Szymanski of Schroders Salomon Smith Barney in London.

The IT analyst for central and eastern Europe explained that a number of companies in this region are now filling their ranks with highly-qualified IT engineers whose skills are prized in EU countries, and then renting out their services to boost their own revenues.

"Demand is high and the supply is there, so it's a question of simple economics," he said. "There are many companies in local markets looking to export labour to places such as Germany. Over the next year or so we'll see the full extent of this, but it's still really wait and see."

The gloomy prognosis for the sector is seen as a yardstick for the future of many other business sectors. Slovakia's average wage stands at 11,000 crowns ($250) per month, with employees in sectors such as manufacturing and health earning far less. Unemployment outside the service-sector oriented capital Bratislava reaches as high as 30%.

The omens from the EC, as Slovakia looks to set up a joint consultative committee on preparing for EU entry late this year, also look less than promising for keeping Slovak workers in their own country rather than following large wage packets and job opportunites abroad.

"There's never been a pan-EU employment or wage policy, and there won't be one after [eastern and central European] enlargement takes place," said Nicholas Foster of the EU's press department at the Enlargement and Social Commission.

While regional aid packages are available from the EU, something Foster says is likely to be widely taken up by the former Communist-bloc countries after their accession to the current 15-member union, there is little else within the organisation's remit to help Slovakia or similar countries retain their own skilled workers.

"There are regional aid packages available, but there is no specific wage policy set down by the EU. Any change like that would need a proposal for a new EU legislative chapter, and that would be unlikely," said Foster.

However, EU representatives have said that across the EU, movement of labour between regions can bring important economic benefits and that fears over a labour exodus can be allayed by reference to historical parallels.

"If you look back at the situation with Portuguese workers going to France in the 1950s and 1960s, you found that after Portugal joined the EU in 1986, the number of workers leaving actually fell to a trickle because there was so much inward investment into the country by the time of [Portugal's accession]. It was strange, because before Portugal became an EU state, workers needed a visa to go there, but as soon as they didn't they were all staying put in their own counrty," said Foster.

"People may think that there will be a localised rush when these countries join the EU, such as people going from Bratislava to Vienna, but that kind of mobility isn't such a bad thing," he said. "It's always good for a host economy, because the people coming can make their own contribution to that economy, and it's the kind of thing that has happened in the EU already anyway."

Fighting back

While the threat of an exodus weighs heavily on Slovakia's HR market, some firms are already trying to take an international approach to securing the continued loyalty of their staff.

"Companies in Bratislava face a real threat from this labour exodus," said Ivan Debnár, development director of Zoznam, one of Slovakia's largest web-sites. "But we are an international firm, working with other firms abroad [the company recently entered into a partnership with Sweden's Scandinavia OnLine - ed. Note], and I think that by our becoming more international, employees will not be tempted to look abroad to see how other international firms work."

He added that the competitive wages his firm can offer mean a comparable employment package for staff that will stop them taking the short trip across the border for other work.

"The real wages we pay are probably comparable to those offered by firms in the West," said Debnár. "They are competitive wages."

HR analysts have repeatedly called for Slovak firms to offer competitive wages to employees if they want to keep their best employees.

"It's difficult to pinpoint exact figures, but people are leaving, maybe just for money, but probably for a whole package that includes money, experience and opportunity," said Stanislava Luptaková of Comenius University's management faculty.

"It seems pretty obvious to me that if a [local] firm offers international experience, wages and good opportunity, employees will stay," she added. "At the end of the day, if a firm wants its skilled workers to stay, they are going to have to offer conditions for these workers to do so."

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