Written by Mark Carter is with PricewaterhouseCoopers HR Services group.
This article first appeared under the title “Draining The Skills Pool” in Business & Finance dated 23rd February 2007
The European Union’s Lisbon Strategy in 2000 foresaw Europe becoming the most dynamic and competitive market in the world by 2010. In this world employers would be able to plug skills gaps at competitive costs due to the increased mobility of skilled workers. But, with the exception of Ireland, the UK and the Nordic countries, mobility is falling well short of expectations, according to the Managing Mobility Matters 2006 report released by PricewaterhouseCoopers and the European Commission in December.
This study, undertaken with the participation of 445 European employers, suggests that intra Europe mobility is not sufficient to support current business needs. The primary reasons for Irish businesses to use mobile workers are to:
- obtain appropriate skills
- build up business internationally
- standardise operations across the EU
- improve customer service
- attract, retain and develop staff.
Mobility of professionals in the EU is insufficient with only 5% on average of applications for management, professional and skilled manual positions coming from foreign workers. The Lisbon strategy aimed to expand the number of skilled workers but almost half of Irish employers reported difficulty in recruiting foreign born employees to senior management roles.
Mobility Barriers
Employers perceive language skills and employment opportunities for the spouse to be the most important barriers for individuals. Employers see the primary policy related barriers as tax system differentials and the lack of integrated EU wide legislation. Less important in the eyes of employers are business related factors where differences in remuneration and the cost of relocating employees are the main perceived barriers.
Obstacles as seen from the individual’s perspective are somewhat different. The key factor discouraging mobility is fear of losing one’s social network. Many feel that social, family and cultural barriers far outweigh the benefits of increased pay or living standards which a move may deliver.
Other individual concerns are around housing and healthcare provision and deficiencies in pensions portability, recognition of professional qualifications and information about working and living abroad.
Irish Concerns
Despite the influx of nationals from the new EU member states since 2004, many Irish employers believe that the European labour pool is still insufficient to meet their skills needs in certain sectors, forcing them to look elsewhere. The new Irish Employment Permits regime, which sees a shift towards more targeted schemes focusing on high value jobs and skills shortages, is expected to help ease the obstacles to importing non European talent.
Irish firms are very positive about the benefits of an international workforce. Four out of five Irish employers see foreign workers as being ready to fit in, whereas less than a third of EU employers generally would share this view.
Looking ahead, more than three quarters of Irish firms expect their need for mobile labour to increase over the next five years.
Overcoming Obstacles
Positive communication from governments and proactive engagement from business can facilitate more worker mobility. Steps can be taken at individual member state level such as providing easily accessible information about working and living abroad. Currently, the process can be intimidating and complex. The study recommends raising awareness across Europe of facilitation agencies such as EURES, a European Employment Services network co-ordinated by the EU, with EURES itself encouraged to broaden its services.
Lack of cross border recognition of professional qualifications has previously been a stumbling block but this is beginning to be addressed.
More integrated EU wide legislation is seen as part of the solution. But while labour law differences for example are a barrier, employers in less stringently regulated labour markets will be particularly concerned that integration does not have the effect of rendering Europe less rather than more competitive.
Employers in other European countries could learn from Irish businesses who it is suggested have been more creative in their techniques to overcome recruitment barriers. Whereas others focus on limited solutions, Irish employers used a range of approaches. For example increased training for existing employees, and more contract workers, although it is recognised that labour laws create greater barriers in some countries to the use of certain options.
Employers should consider a remuneration policy for mobile workers aligned with overall business strategy. Several factors need to be reconciled including staff motivation, performance recognition and cost management. Specific reward areas require careful management to consider their flexibility and transferability, including pay scales, incentive and variable reward, tax and social security treatment/efficiency, pensions/benefits and employee domestic arrangements.
Employers could provide more language and cross-cultural training, and implement family friendly policies for mobile labour. They could also provide more assistance for employees in dealing with unfamiliar tax and employment systems, and also improved relocation support.
Controlling remuneration costs is the key issue which Irish employers believe they need to address to facilitate the continued importation of talent. Many multinational employers believe that the curtailment of the remittance basis of taxation since 2006 has hampered them from developing critical skills and high end jobs. The recent relaxation of the Irish tax rules regarding to assignment expenses for employers bringing supported assignees for up to two years, allied to the new Employment Permits regime, is welcome but will these measures prove sufficient to facilitate the importation of seasoned executives and specialised resources at an acceptable cost? Employers in key sectors such as Financial Services believe that it should not be beyond our legislators to develop an acceptable special assignment relief programme aimed at allowing corporations to control assignment costs, one with adequate controls to eliminate abuse and promote equity and transparency.
A number of significant challenges face businesses and policy makers which, unless quickly addressed, could undermine the availability of senior level talent and ultimately EU competitiveness. Goods, services and capital now flow more freely throughout the EU. If workers did the same, European businesses would reap substantial economic dividends.
