General Election 2010: What difference will HR professionals notice on the morning of 7 May?
Peter Crush analyses the likely ramifications, while three experts give their verdict on 13 years of Labour government.
Whether you're sick of it, or just glad it will soon be over, this week's General Election has been one of very few predicated on what politicians can give HR directors to revive a wilted economy.
Mud-slinging and presidential-style TV debates aside, it is an election almost entirely about jobs, growth, recovery and about giving HRDs the confidence to do what they do best - to recruit and retain top talent. The stakes are high. The PM needs you. But when the sun does rise on 7 May, will the HR community really do anything different?
According to Tory leader David Cameron and his lieutenants, specific policies, such as reduced National Insurance (NI) contributions for organisations that employ people who have been unemployed for more than three months, will create 350,000 new jobs. Across-the-board abolition of Labour's planned 1% rise in NI contributions will also protect 57,000 jobs under threat of the axe. Most crucially, they believe this gives HRDs the signal they have been waiting for: to start recruiting again.
"It would be nice if this were true," says Gary Browning, CEO of recruitment consultancy Penna. "While the election has had a paralysing effect, with HRDs adopting a 'wait and see' approach, only a really clear outcome - a Conservative majority of 20-30 seats - will create the economic confidence to really get things moving. What's fascinating though is just how this 1% NI call has become the real defining issue of the campaign. It's simple economics - business tax equals less job creation equals less GDP growth, but it's become a real battle line."
Confidence seems to be what HRDs want more of rather than any specific policy promise. "NI doesn't make a blind bit of difference to our recruitment plans," says Stuart Comer, head of HR, Topps Tiles, which last month warned that 'subdued trading' will knock £3 million off its expected £16.3 million profits for this year. "Fuel prices affect us far more."
He adds: "The thing I really want to happen is for the country to talk up the economy. To give people a feeling there is a bright future could make a big difference. Recent good news in the retail sector is coming back. Confidence is everything; we need a palpable sense of something new. A hung parliament could stall this."
In a survey by hrmagazine.co.uk at the time the Election was called, 45% of 600 readers thought the Tories had the best policies for employment; 36% preferred Labour and 19% favoured the Liberal Democrats. Bad news for Cameron is a recent poll by the Centre for Enterprise, in which a whopping 88% of CEOs said they would not be recruiting graduates this year. A half, meanwhile, said they have no internal vacancies at any level. But Phil Clarke, former global head of recruitment at Marconi, believes HRDs will sense a change, whatever: "There are always recruitment needs, always projects ready to come off the back-burner. Companies have been waiting to grow," he says. "Firms have been stretching existing staff, but their talent management has not been so slick that they won't need to rehire. It won't be a jobless recovery." He adds: "What I think will change is the ratio between permanent and temporary hires. At Marconi we hit a 50:50 ratio in times of uncertainty, but we would strive for 70% permanent, 30% contractor. Returning confidence will cause other HRDs to aim for this, but confidence will also return to the candidate base so HRDs will also find themselves recruiting just to replace staff that had previously held tight."
Just what this will do to pay is a moot point. A non-Brown government should avoid the need for the 3.3%-17.5% rises that benefits provider Hymans Robertson last month predicted firms could be forced to pay just to keep staff and neutralise Labour's planned tax burden on higher-paid employees. But, according to WorldatWork's most recent annual salary survey, budgets for salary increases are at the lowest level in the study's 36-year history, with 2010 projected increases averaging 2.8%. "HRDs are not going to wake up feeling any different on 7 May," says Brian Groom, employment editor at the FT, "but if Labour triumphs on that day they will need to think about the extent to which they can pass on the NI rise in terms of lower wage increases. If they do that, there is no reason the 1% rise has to be a tax on jobs; it could be passed off as a rise on income tax for people in jobs."
A sliver of hope for all the political parties is the 49% of respondents from the Centre for Enterprise study who said they would consider recruiting if given 'government inducements'. In the past, these have come via the various skills bodies, but HRDs should expect the skills and training sector to be among the worst hit. Whichever party wins, the days of the bottomless pit to fund key skills training seems finally to be over. According to Allan Cook, chairman of Atkins, this means HRDs will have to wake up to a new dawn of employer-paid training. "We've really benefited from the money that has been made available to us," he says. "Great companies recognise skills investment is a joint necessity, but there are too few great companies and too many others that have relied on government handouts."
At the time of writing, the Tories had released few details of what HRDs can expect, except that money would be moved away from Train to Gain to offer SMEs a £2,000 sweetener to take on apprentices. If they win, though, prepare to have to relearn the entire skills funding landscape. "The Tories have hinted they do not approve of the regional development authority structure," says Terry Watts, CEO of Proskills, the sector skills council (SSC) for service manufacturing. "They believe it's duplication and would rather devolve decision-making to local authorities and businesses direct." The problem is that at the same time as the Tories want regional skills strategies, the SSCs have been developing sector-specific skills strategies, which puts their very relevance or existence under pressure.
Should the Conservative party win, HRDs could be stuck in the middle of a battle for who gets to distribute ever-decreasing funding. Watts is likely to be squaring up ideologically to bodies such as the Association for Colleges. Pat Bacon, Association of Colleges chair, says she feels she's left fighting for the scraps (the average college has suffered a 14% reduction in government money), but says colleges, not SSCs, are best at working with businesses to identify skills needs: "We've got ourselves into a position where funding is messy and it will surely get worse; at my own college [St Helen's, Merseyside], I have 13 different pots of money I can bid for, but what I do not have is the ability to move these funds around. There's also a disconnect between what SSCs want and what skills employers value. SSCs are at very different stages of development, there's a question mark about how well they speak to their industries."
HRDs can ill afford such squabbles. "The problem is that, at present, funding bodies lack a fundamental understanding of the real needs of the business community," grumbles Richard Harpin, founder and CEO of HomeServe, which last month pledged to invest £1 million of his own money developing apprenticeships over the next three years.
SSCs would argue employers ought to assume responsibility for this (Level 3 skills training and above), freeing government funding for pre-employment up-skilling. But it seems HomeServe is doing this out of frustration with the system rather than working with it. "Employers are being stymied by bureaucracy, while funding agencies don't allow businesses to automatically improve training to suit the needs of their organisation," Harpin says. He is calling on Cameron to increase funding offered to SMEs to take on apprentices.
Bacon predicts the Tories will see the number of SSCs reduce and, according to Philip Whiteman, CEO of Semta, the engineering SSC, in a post-election squeeze on finances SSCs and HRDs will have to learn to "work with the system, not against it". He adds: "Employers will have to dip into their own pockets more - that's a fact. It will be impossible for any government to keep up the levels of funding that we have had."
But perhaps the greatest nightmares are being suffered by public-sector HRDs. They will wake up on 7 May not to uncertainty of cuts - this is inevitable - but to just how quickly they happen: either fast and deep under Cameron, or slower and graduated under Brown. "Councils are preparing for upwards of a 25%-30% cut in staff numbers," says Dean Shoesmith, HR director at Sutton and Merton Borough Councils. "We anticipate 300-500 jobs going at Sutton [which currently employs 5,800] and up to 1,000 from Sutton [current headcount 5,500]. "One problem is that 60% of our staff live in the boroughs themselves; so not only will the council have to run with fewer people, but the staff we lose will be returning to the council for job-seeking services."
In such a fiscally tight economy, no party will relish the task ahead. The weight of expectation is on HRDs' shoulders. Britain will change this month. Just how much could be down to you as much as the winner smiling on the steps of Number 10.
WAS IT BUSINESS WOT WON IT?
When CEOs such as Stuart Rose of M&S, Justin King of Sainsbury's and Stelios Haji-Ioannou of Easyjet - alone responsible for employing 0.5 million staff - are described as 'rogues and knaves' for putting their signatures to a letter denouncing Labour's planned 1% rise in NI contributions for 2011, it's clear New Labour's cosiness with business has all but ended. The much-criticised 'tax on growth' has been one of the few policy differences between the main parties. Rose said that the NI increase would cost M&S £10 million a year. "Giving HRDs a NI credit is worth £8 billion to UK business, and is the equivalent of giving each company a 1% or 2% saving on their wage bill," says Richard Baron, head of taxation at the Institute of Directors. He adds: "It's a signal to stimulate hiring rather than a helping hand, but it will chime with voters - employees - and bosses, who believe the way to cure the economy is with public-spending control rather than tax rises. The IoD is adamant on this." At the time of going to print 400 business leaders had pledged their support to scrapping the NI rise.
RUTH LEA, Economist and former director, Centre for Policy Studies
"The Labour Government has imposed a never-ending stream of initiatives, policies and legislation. The New Deal has delivered disappointingly little and there is no doubt Government's policies have added to the costs of businesses, SMEs in particular.
"Small businesses can be regarded as the backbone of the economy, but regulatory changes have included extra maternity and paternity rights, the Working Families tax credit, the National Minimum Wage, the Working Time regulations, increased anti-discrimination legislation and the right to request flexible working.
"While I am aware Labour has attempted to balance the interests of employers and employees, and that many regulations come from the EU, these considerations can be regarded as mitigating circumstances. They do nothing to lessen the inevitable costs for business and the undermining of British business's international competitiveness.
"Economic booms and busts apart, lightly-regulated economies have better employment records than those where the employment regulations are heavy. In this respect Labour has undermined the efficient working of the labour market by making it harder and more expensive for employers to employ people. They have undermined the possibility of full employment.
"The Government's immigration policy has added to the flexibility of the labour market, but this benefit has been at a cost to the indigenous workforce in terms of fewer job opportunities for young people. Meanwhile a third of pupils failed to achieve five good GCSEs last year. Reflecting this failure, one in 10 16-18 year-olds are not in employment, education or training.
"The emphasis on the 50% university target has distracted Labour from setting up a robust vocational pathway for 14-19 year-olds. At the other end of the age-scale, it is increasingly clear older people will be forced to work longer. It's another failing. Ironically Gordon Brown's disastrous undermining of private-sector final-salary schemes is proving to be a powerful motivator."
BRENDAN BARBER, General secretary, TUC
"In 13 years, Labour has introduced a number of landmark employment rights - the National Minimum Wage; the right to request flexible working; improvements to maternity, paternity and adoption leave and next year's Agency Workers Directive.
"But unions have fought hard for these rights. Each one has been strongly opposed by employers who claim the extra burdens will restrict staff recruitment and cost jobs.
"There has never been any evidence to back up these claims. In fact, more mothers of young children are working than ever before and flexible working continues to grow. Critics claimed the minimum wage would cost a million jobs. But in the 10 years since its introduction, low-paying sectors, such as retail and hospitality, have been among the fastest-growing.
"These rights are hugely popular among staff and are becoming firmly embedded in our workplace culture. A factor behind the success of the minimum wage has been the way rates are set by the independent Low Pay Commission. As a result, the minimum wage has increased by 60% over the past decade - 50% more than average earnings.
"Unfortunately, a minority of employers still dodge paying the minimum wage. This abuse exploits workers and undercuts legitimate employers. Its future success depends on a government committed to strong enforcement and continuing to set rates so that they grow in relation to earnings. And despite new rights to request flexible working, UK workplaces are still not family-friendly enough. Employer resistance to paternity leave remains strong and pregnancy discrimination continues.
"The challenge now is how far flexible working and caring strategies can be extended. The TUC believes flexible working should be available to all staff. A higher employment rate for mothers of young children will also help reduce the gender pay gap to just over 16%. Without this, the motherhood penalty will remain as potent as ever.
"In previous elections, parties argued for and against family-friendly working rights. Today, the political fight is about who has the most family-friendly policies. But with businesses using the recession to call for a moratorium on new employment rights, further progress in making the UK a fairer place to workplace is far from secure."
SARAH JACKSON, Chief executive, Working Families
"If success is measured by the weight of the statute book, then Labour has performed well this decade. Since 1999, we have seen the introduction of parental leave and time-off for dependants; and statutory paternity leave and flexible working rights for parents and carers. We have seen maternity pay extended to nine months and maternity leave to a full year. We are promised additional paternity leave in 2011 regardless of the colour of government, so mothers can transfer some of their leave to fathers.
"But ask a working parent whether their life is less stressed, whether childcare is sorted and whether their balance between caring and working has become more manageable, and I hear a range of views.
"Undoubtedly many parents have reaped many benefits and the Government is right to be proud of its legislative achievements. But we still hear stories of exorbitant childcare costs, unreasonable working hours and in-work poverty. We still hear about parents of disabled children who have been forced out of work by inflexible employers. And there are carers who cannot make ends meet, who are struggling with caring for older relatives and children. The problem is that a statutory right is not enough on its own. Many workplaces have reluctantly complied with legislative minimums, rather than embraced the change in culture that was intended by the legislation.
"The failure to package and present legislative changes positively to business has been a weakness of the Labour Government in later years. Lower-paid, lower-status workers have found it hard to take up rights in the face of discrimination and outdated beliefs from employers. Almost half of men say they cannot afford to take paternity leave. Their requests for flexible working are turned down at twice the rate of women's. Improving access to the new rights - so that all families benefit from time together - will be the challenge for the next government.
"Without positive messages, change may stall. When flexible working was first introduced, the business case was trumpeted by the then Department of Trade and Industry. Government gathered employers together, demonstrated the business case, emphasised the importance of change, and congratulated business leaders who acted as exemplars. But somehow such enthusiasm has been lost along the way.
"Whoever is next in government has to be bolder. Employers won't take on change if the government's heart isn't in it. The next government needs to lead cultural change by shouting the benefits from the rooftops."
WHO'S GOING TO WIN?
It's the closest race for decades, but Ken Ritchie, CEO of The Electoral Reform Society, gives it to Cameron - but by a whisker. "He needs 326 seats for an overall majority, but he's likely only to reach 310," he says. "We believe this is enough of a mandate to form a minority government without the need for a coalition, as Labour will be distant on 220 seats." But it's going to be seriously close. The Tories start with 172 'safe' seats that, in electoral terms, are uncontested. "There are a further 78 'seriously marginal' seats, and 100 more open to Labour with just a 4%-6% swing. "It's much tighter than the talk of 10-14% national swings needed. Swings don't need to be national."