The challenge for 2013: Higherperformance on a lower budget

How to generate increased performance among employees, but with a decreasing budget, will be one of the tough puzzles that human resources professionals have to face in 2013, according to experts in the sector. They also agree that changes to Slovakia’s key labour legislation, its Labour Code, will negatively impact the willingness of employers to hire new people.

(Source: TASR)

How to generate increased performance among employees, but with a decreasing budget, will be one of the tough puzzles that human resources professionals have to face in 2013, according to experts in the sector. They also agree that changes to Slovakia’s key labour legislation, its Labour Code, will negatively impact the willingness of employers to hire new people.

The Slovak Spectator spoke to Mario Fondati, partner at Amrop; Martin Krekáč, senior partner at Amrop and chairman of Jenewein Group; Veronika Kaštovská, partner and senior consultant for the Czech Republic & Slovakia at Accord Group; and Katarína Bobotová, operations manager at Grafton Slovakia, about anticipated changes in the HR policies of firms and organisations, the impact of the revised Labour Code on the market as well as the changing expectations of job applicants.

The Slovak Spectator (TSS): How will legislative changes such as the revised Labour Code and recent changes to the tax and payroll tax rules affect the labour market in general, as well as the sector that your company covers?
Mario Fondati (MF):
The changes referred to, which came into effect this year, will have a negative impact on the labour market. They are a set of measures that prevent [businesses] from employing people, so it may be expected that unemployment will be at its highest. In the name of increased protection of employees, it seems that the changes will ‘protect’ people from finding a job. In a situation when in the world economy, including the Slovak economy, almost anything is difficult to predict, there should be a tendency towards greater flexibility in employment regulation. The current government has embarked on a different path, and I am afraid it will not help to increase employment or jumpstart the economy.

Veronika Kaštovská (VK): Generally, every change in flexibility for employers will have an impact on their willingness to hire new people; it will be more difficult for employers who are using third parties to hire employees (temporary employees through agencies). It will probably not have any major impact on our sector, which is the search for top managerial positions, but overall the slowdown of the economy might influence the willingness to open and invest in new positions.

Katarína Bobotová (KB): As a consequence of the changes to the Labour Code, we have recorded lower interest in so-called temporary employees. Some companies are reporting plans to cancel positions that in the past were filled by temporary employees and distribute these tasks among current core employees. The tax hikes will most probably have the effect of lowering the competitiveness of Slovakia compared to neighbouring countries in the eyes of potential investors. The flat tax, in our experience, was one of the most fundamental attractions for new employers.

TSS: Market watchers expect that Slovakia’s GDP growth will slow in 2013 compared to 2012. Do you expect any changes in the human resources policies of organisations, firms and businesses?
Martin Krekáč (MK):
The existing pressure on personnel costs will remain and create pressure for higher efficiency. So HR departments will be solving that ever-present conundrum: how to achieve increased performance of employees with decreasing budgets. Efficiency in everything the organisations do will be the key to success. In terms of specific HR policies the focus will be on retaining high-performing employees and a small increase in the attrition rate will be appreciated, i.e. due to the higher cost of dismissing people, seeing people leave and not replacing them will be one of the policies used to grow efficiency in organisations. It can also be expected that the tendency toward centralisation of support functions, including HR, serving an organisation across a number of entities, will continue.

VK: Companies have been going through restructuring and cost-effectiveness changes for the last two to three years, so the trend will continue. For our business we see more companies using internal resources for hiring new people (in-house recruiters), who are using, for example, social media and other sources. Social media generally might leave an impression that anybody could do recruitment easily, but of course there are also potential dangers, for example that information that people would like to present about themselves might not always be true. In the organisation of HR departments there are continuous trends in terms of building a partnership between HR and business (business partnering); there is also pressure to work with internal talent (focus on talent management).

KB: The slowdown of the economy has been resonating for a long time and we have been registering efforts to trim the HR departments of some companies, with pressure on the effectiveness of labour. More frequently we cooperate with clients in the form of outsourcing of HR services, be it outsourcing of parts or of the whole selection process, or outsourcing of the wage agenda. This helps our clients to react more flexibly to the needs of the business by preserving the effectiveness of the internal HR department.

TSS: What are the challenges that people aged 50+ are facing on Slovakia’s labour market? Is the market tuned to use the potential of this generation of the workforce?
We cannot generalise, but the 50+ generation might have difficulties accommodating the increased expectations of employers. Those who are out of the job market might have difficulty finding a new job; along with graduates and the long-term unemployed it is this group of people that find it very problematic to find a suitable job. Since the state thinks that it can create specific programmes to help employ specific groups, instead of focusing on creating favourable market condition for entrepreneurs and a flexible labour market, it is doomed to fail. So I am afraid people over 50 face difficult times, despite, and maybe due to, the policies that the government has introduced.

VK: No, the potential of this generation is not fully utilised, and they are still regarded as less flexible and with less potential for further development (during the hiring process). On the other hand I see changes in preconceptions about this generation: some companies are not afraid to hire them, and are looking for their experience and a certain level of maturity.

TSS: What are the most significant challenges for HR firms in 2013? How has the structure of services provided by HR firms changed over the past couple of years? Do you expect further changes in this structure?
HR firms need to focus on finding service offerings that will address what companies really need. The tendency towards internalisation of many services provided by consultants will continue, even if it means that the service is of a lower quality and may not be helping the company as it could. HR consulting companies that fail to find the right service offering will try to survive by aggressive pricing policies, as there will be nothing else for them to offer clients. I assume that many HR managers will try that option instead of working with consultants and investing in quality. After disappointment and losing valuable time they may turn to consultants with valuable insights and quality services.

VK: Due to economic changes, companies are trying to save money on external services. In international corporations there are changes in the decision-making process: decisions are not taken locally, but at headquarters level. HR firms need to be more flexible; they need to be close to their customers, to be able to predict future changes and react to them; they have to offer services responding to the current situation. Again, I see the future in building professional partnerships to understand the needs of customers. For the future, I see more possibilities for using online services and social media, where HR companies have to be able to use their potential and generate value-added services. There will be continuous pressure on price and timing. Hopefully the quality of service (references) will still be awarded.

KB: Classical forms of recruitment services have become outdated and we feel the need to continuously offer clients new solutions, mainly in the area of talent identification.

TSS: The Education Ministry is, among other things, considering more support from the state for study programmes in technical and science-oriented schools, as well as steps that would restrict the number of graduates from humanities subjects, in order to address the challenges of the education system. In your opinion, what steps would help to improve the education sector so that it is better suited to meet the needs of the labour market?
In general, any regulation is counterproductive; on the other hand, the mismatch between what the job market needs and what schools generate is obvious. The quality of education is another question. I think one of the solutions would be to stop pretending that education is for free and start serious discussion about school financing that would combine public and private financing. That could create pressure on quality and also on what is being taught. With a system of loans provided by future employers to students, it could help the education system as well as employers to have graduates with the knowledge and skills they need. I think this could be beneficial to students, the education sector, employers and our country.

VK: Generally, closer cooperation between the education system and the labour market – closer cooperation with corporations and companies, listening to their needs, and getting their participation in creating the education system; incentives for companies to offer work for students to obtain experience during their studies. KB: Our education system would need more [practical aspects] in the form of lecturers from successful companies. At the same time there is a need for intense participation by current employers in the education process so that graduates leave schools ready to operate based on the real requirements of employers.

TSS: Have the expectations of job applicants in managerial positions changed compared to two or three years ago?
Managers have not changed much. What has changed is that the competition for open positions is tougher. There are fewer opportunities than managers who are able to apply for them. In this situation some managers are inclined to modify their expectations in order to increase their chances of landing a job. The premise that there is only a limited number of exceptional candidates is still true. Good companies try to retain them and make them happy, so that these managers do not wander into the job market searching for a better place. Identifying, approaching and attracting them takes the wits and skills of a true professional.

VK: Yes, today managers are generally looking for a stable position, and the reputation of their future employer is also important. Also, there is more pressure on work-life balance (managers are looking for positions where they can spend some time with their families and be able to relax, or pursue hobbies).

KB: In general we can say that applicants for managerial positions are slightly more cautious about changing their current employment. In comparison with the previous period, we observe that for these people stability is often more important than challenge. However, we do not record fundamental changes in their expectations.

For more information about the Slovak labour market, HR sector and career issues in Slovakia please see our Career & Employment Guide.

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