HR adapts to new challenges

The uncertain economic climate has forced HR professionals to spend less on
recruitment and turn increasingly to oursourcing over the last year. Ben
Willmott reports

Staff turnover has reduced, employers are spending less on recruitment,
employment-related disputes are on the increase, and more HR functions are
being outsourced.

These are the key findings of a major benchmarking report, Analysis of
Personnel Activities and Costs, which provides an insight into some of the
profession’s priorities and trends that have developed in the past year.

Conducted by DLA-MCG Consulting, the report is based on the responses of 138

Uncertain economic conditions have contributed to the reduction in
advertising expenditure and the reduced staff turnover, which has occurred in
both the public and private sectors. But coupled with the trend for
outsourcing, this has meant HR departments are able to focus on strategic


Employers are spending 10 per cent less on recruiting managerial and
professional staff, largely because less is being spent with recruitment
agencies and on advertising.

The cost of recruiting a manager through an agency stands at £4,139 in comparison
to £4,733 for the previous year.

It is suggested one of the reasons for this fall is that agencies have
reduced costs by at least 5 per cent to compensate for the immediate problems
of low revenues after September 11.

Advertising spend per managerial recruit is down by more than 8 per cent.
Overall spending on advertising for support staff is up due to increased
spending by larger public sector bodies, but in the private sector it fell by
between 18 and 21 per cent.

One area which has grown significantly is online advertising. Spending in
this area has doubled from 4 per cent to 8 per cent of recruitment budget.

Derek Burn, director of consulting for DLA-MCG, is not surprised by the
growth in online recruitment because of the cost and time savings it can

"There are some significant online recruitment initiatives being
developed. It would appear to be a way forward," he said.

A key finding is that skilled professional people are the primary users of
the net for job seeking, with more than half using it compared to only one
fifth a year ago.

Staff turnover

The report reveals that overall staff turnover has reduced from 20.6 per
cent to 15 per cent over the past year and links this to the economic downturn.

However, managerial turnover increased from 10.2 per cent to 12.1 per cent,
suggesting that firms are seeking to increase competitive advantage by
recruiting effective managers.

"Employers are recognising that they have to become lean and mean to
survive, but there is always a demand for good management skills," said


The average number of days lost to absenteeism per employee has remained
static at 9.2 days a year, with manual workers and support staff more likely to
take days off sick than other categories of employees.

The average number of days lost to absenteeism in the private sector was 8
days compared to 12.9 days for public sector organisations.

HR staffing levels

The number of HR staff per employee has remained fairly static at 1 to 82
but there have been recent signs that this ratio is increasing. Burn puts this
trend down to the move towards outsourcing and the increasing use of technology
to carry out more transactional HR activities.

"Line managers now get direct access to HR systems and data previously
administratively collated, analysed and provided," he said.
"Unsurprisingly, administrative staff have taken a big hit on numbers
while HR still manages to maintain strong central and strategic control."


The study reveals that both private and public sector organisations are
turning increasingly to outsourcing firms to provide improved efficiency and
cut costs.

Nearly 80 per cent of private sector firms outsource some aspect of their
recruitment process and 83 per cent use an outsource provider to provide
training and development for staff.

Half of all private sector organisations outsource their payroll and almost
a third outsource HR policy and planning.

Among public sector organisations, 64 per cent outsource their training and
43 per cent outsource recruitment.

Almost 30 per cent of public sector bodies outsource their payroll and 21
outsource welfare counselling.

Burn was not surprised the study finds outsourcing is becoming increasingly
popular with employers.

"This is a trend that has far from peaked. Our findings show there are
moves to outsource activities as diverse as reference checking and even
inductions," he said. Outsourcing providers appear attractive because they
can offer a specialised service and allow HR teams to concentrate on strategic
issues, he added.

"Outsourcing can help HR professionals to concentrate on the main
stream of the business," he said. However, he warned that organisations
should consider the potential drawbacks as well as the positives before
outsourcing a business activity.

"The biggest single threat to organisations arising from this movement
is that in handing over complete activities they lose control and will have
difficulty in recapturing them – or even achieving re-tendering competitively
when the contract comes up for renewal," he said.

Time analysis

The benchmark study shows that managerial and professional HR staff in both
the private and public sectors spend 12 per cent of their time on HR policy and

Industrial/employee relations also account for a significant proportion of
time, with senior HR staff in the public sector spending 13 per cent of their
working week on this issue and private sector staff, 12 per cent.

Private sector HR staff spend 11 per cent of their time on staffing and
recruitment issues and a similar proportion of their time on training and
development whereas public sector HR staff spend 10 per cent of their time on
each of these areas.

Employee relations

The number of employment tribunal cases per member of staff has increased
significantly over the past year according to the benchmark report.

The ratio of employment tribunal cases to employees has increased to one
case for every 417 employees from one per 476 employees.

The number of grievance claims has also increased marginally overall and by
as much as 8 per cent in smaller private sector companies.

Burn attributes this growth in disputes to low pay settlements and increased
pay transparency.

"There is a greater awareness," he said, in that people are more
likely to know what work colleagues are earning.

He said the increase in grievance claims could be connected to forthcoming
changes in the Employment Bill which will mean staff will have to exhaust
internal grievance procedures before resorting to employment tribunals.

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