The economy may grow a bit in 2011. But the true meaning of Double Dip is now clear; the 2008 downturn in the private sector economy followed, in 2011, by a real reduction in the value of personal income of most of the population as the impact of rampant and rising real inflation (what price now quantitative easing?) and tax rises bite.

A challenge for employers now, of course, is how to manage the inevitable demands for pay increases as this pain is felt in an economic environment that is, at best, staggering. The answer is a continuing focus on activities and performance which create value. A mantra, perhaps, of no increases without a shared and delivered gain, which means a renewed focus on clear leadership and objective setting.

In the meantime the Government keeps saying ‘we are all in it together’. It is just that as the Banks apparently now have a licence to carry on regardless, (spreads on loans and transactional charges are still being increased at a rate well above RPI, if our experience is anything to go by, and bonuses are being paid while publically underwritten balance sheets remain in need of repair), it just doesn’t feel like it. In HR terms a good description for 2011 is ‘back to basics’.

Over 50% of most organisations operating expenses are spent on their workforce. So whether your people are or aren’t ‘your most valuable asset’, they are your biggest cost.

But the relationship between this resource and the organisation is contained in the employment contract, which, as our employment law expert, Stephen Finn, pointed out at a team meeting last week, is all about employers obligations to their employees and disciplinary and grievance procedures. There is very little about what the employee will be doing in return. Surely, he said, we should balance it out. There ought to be more emphasise on what employees will achieve at work.

Is he right? Are current contracts of employment fit for purpose? And if you had a free hand, what would you put in the contract? We’ve got some ideas ourselves but we’d love to hear your views to help fuel our thinking.

As red in tooth and claw as it slashes its way through the public sector, with an equivalent effect on public sector HR functions? As a slayer of bureaucratic sacred cows? Or as an implementer of increased employment rights (The Equality Act, increased Agency Workers Rights, increased Maternity and Paternity rights and taking away the default retirement at 65 to name a few?) Both probably. It is unlikely to tear up employment protection or the creaking, complex and overweight employment tribunal system. But one area of HR activity that is set to grow is the active management of performance at work. Forced on by the removal of the default retirement age, capability is now the name of the game. Can’t do or won’t do? The new economy is sweeping away the old hiding places and any lingering room for complacency. How HR will remember the Coalition will depend on how HR practitioners respond to the performance challenge. There will some who can – and plenty who can’t.

As flavour of the Coalition month is challenging sacred cows (or at least parts of the new vetting and barring scheme) how about ripping up the ACAS Code of Practice on Disciplinary and Grievance Procedures? Well at least the part that requires employers to write to employees spelling out their disciplinary misdemeanours in detail and then leaving time to fester before a meeting. It’s great in theory, but the practical effect in the humdrum world of work is that participants get entrenched, problems get harder to solve and too many times employees on the receiving end of ‘an invitation to a meeting’ take to their sick bed. At a dismissal stage the pseudo court of law approach employers are expected to adopt might be OK, but in earlier stages in the procedure?      

Well, it is borne by employee’s and employer’s, represents a direct increase in employer’s costs and reduces employee’s spending power (unless employers increase pay to compensate). So yes, probably. But putting aside public sector spending cuts, which have a pretty close correlation to numbers employed, is it more destructive than the touted alternative, an increase in VAT? I’m not convinced and I’m not signing any letters to say otherwise.

It is true that for the average employer a 1% increase in wage costs = a 3% reduction in profit. A reasonable knee jerk reaction might be to think about cutting one job in a hundred. On the other hand, you either need the job or you don’t and if you don’t then tackle the real problem. Plus there are much easier ways to reduce payroll costs by much more than 1% than by sacking staff – ask me! 

VAT though is regressive, directly and frighteningly inflationary, and more likely to lead to an earlier increase in interest rates – which our banks will be quick to pass on to all but savers. So, if you want a sure fire way to take more money out of the real economy, cut demand and cut jobs – raise VAT, not NI.

You might have noticed that while a lot of us have been unable to get to work for a day or two during the current bout of winter weather the milk and papers have been delivered. A fantastic achievement by those concerned.

Back in the day when I was the Personnel Manager for a couple of thousand milk rounds staff based in several dozen depots across the country we sometimes paid ‘snow money’ to recognise the extra effort of making deliveries in challenging conditions. To ensure fair play each depot had a snow ruler to help determine the appropriate amount. Simpler days maybe.

This time round though the airwaves are full of discussions about the ‘responsibility’ of employers to pay staff who failed to make it into work or castigating the meanness of those who don’t. The idea is that pay is a right regardless. It’s not. Staff are employed to do a job. By all means offer those who didn’t the chance to take the time they couldn’t work as holiday or the chance to make the time up later as an alternative to no pay. But we have depended on those who made it in and who have kept the show on the road. Why bother next time if it is all the same regardless?   

David Cameron has said he wants to reduce the burden and impact of Health and Safety legislation – and that it will be done in “a responsible and sober way”. It would be much more interesting if he had said that Health and Safety rules would be rewritten after a drunken night out. As it happens the best he can offer – after 10 years in Opposition and over a decade of 1980’s red tape cutting Conservative government oversight of the Health and Safety Executive – is an “extensive review” led by Lord Young.

When my local Conservative candidate said much the same thing at a meeting with business leaders before the 2005 election, I asked a simple question – “Which 3 pieces of Health and Safety legislation would you repeal?” He couldn’t answer it then and David Cameron can’t answer it now. Why? Because the direction and the aim of the law actually make sense; employers and employees (and organisers and participants) have responsibilities to avoid injury and loss.

What doesn’t make so much sense is our legal process and media driven fixation with pinning the blame on someone and the burning hoops of fire (don’t try this at home) employers and organisers are expected to go through to prove they aren’t to blame. So maybe David Cameron could have taken the opportunity to paraphrase a Tony Blair sound bite and come up with “tough on claims, tough on the causes of claims”. In other words, set some standards for individual responsibilities for employers, employees, participants and consumers.

Licensing is in vogue for teachers and social workers.  Perhaps the answer is compulsory instruction on basic responsibilities for all employers and employees and to make being an employer or employee subject to license? If you don’t take your share of responsibility, you’re out. More practically, when HR professionals, to take just one example, don’t have basic Health and Safety training – so they can separate the myth from the reality – as a part of their core qualification curriculum, we are missing a trick towards securing a common sense approach to day to day activities at work.

The Fathers, Families and Work report, published by the Equality and Human Rights Commission (EHRC) leads with some interesting statistics:

• 42% of working fathers felt they were not able to spend enough time with their children.
• 45% of working fathers don’t take statutory paternity leave, although most said they would have liked to.
• About two in five working men fear that asking for flexible working arrangements would result in their commitment to their job being questioned and would negatively affect their chances of promotion.

As reported in the press and pounced on by commentators this was taken as yet another opportunity to castigate employers. But you could look at it the other way round:

• 58% of working fathers feel they spend enough time with their children.
• 55% of working dads now take paternity leave.
• About 60% of working men are comfortable about asking for flexible working arrangements without fearing that they would be questioned about their commitment or their fitness for promotion.

Put this way it could be that significant progress is being made; in an election these percentages would be described as “overwhelming majorities”.

Maybe it is time for the EHRC to take more encouraging stance.

My view is that the vast majority of employers don’t want to discriminate – why would they, it doesn’t make any sense. By and large they have now got the “flexibility” argument.  And the economics are sound – employers who support flexibility tend to perform better.

But isn’t the biggest challenge now outside of work – mums and dads sticking to stereotypes that are discriminating against employers? What do I mean? I think we are still at the stage where most working couples with children sorting out the school run or the first line of defence when childcare goes wrong automatically nominate mum to fix it. The result puts working mothers, the colleagues of working mothers and the employers of working mothers at a disadvantage.    

Things can only get better but not until the banks operating margins get fixed.

The spread between borrowing and lending rates, plus charges, being operated by the banks is killing the real economy.

If interest rates start to rise and this issue hasn’t been addressed; in other words, if the banks aren’t through their vampire balance sheet rebuilding stage by early 2010 and public sector spending cuts start to bite then, in the words of Bachman-Turner Overdrive, “You Ain’t Seen Nothin’ Yet”.

So what has this got to do with Human Resources, where is our economic contribution?

The answer is in the management of Payroll costs or to stretch the analogy a little by using another BTO song title, “Takin’ Care of Business”.

I don’t mean the cost of processing payslips, although anyone paying more than £2.50 per payslip should be talking to us NOW. I mean the management of every cost associated with employing staff and, more importantly, the drivers of these costs.

Think about the following:

Ø       In most organisations payroll costs are the biggest costs. 

Ø       In most commercial organisations payroll costs dwarf profit – which means a 1% reduction in payroll costs achieves a much bigger profit return.

Ø       There is a huge difference in performance between ‘above average’ and ‘average’ employees. Think 20% plus (Yes I can prove it).

Ø       There are big chunks of hidden cost in labour turnover, recruitment, problem management, absence, poor benefit buying decisions, misaligned pay and bonuses, misaligned activity and poor HR administration. Think at least another 20% plus (Yes I can prove that too).

The bottom line – most organisations have the opportunity to significantly reduce their Payroll costs by focusing on what creates this cost and what they are employing people to achieve.

So, is your HR Director, Manager or Administrator engaging with you on this topic?

No?

Maybe it is time to find an HR Services company that can?