Managing Talent CM Murray.doc

cm murray llp is proud to present together with johan lubbe jackson lewis united states olivier kress flichy grang avocats france piero mandruzzato lablaw italy bettina bender cm murray llp united kingdom moderated by ming henderson vu thi senior employment counsel oracle april 15th 2010 cm murray llp 37th floor one canada square canary wharf london e14 5aa managing talent global restructuring and staff retention in uncertain times managing talent in the midst of the global financial crisis and complying with employment and labor law 5 00 5 30pm registration 5 30 6 00pm global economic crisis it is the highest level in the past ten years according to the preliminary data published by insee the unemployment rate had not reached this level since 1999 the rate had declined to 7 2 in the first quarter of 2008 before soaring due to the crisis a challenge for the government france has never seen such a rapid and brutal increase in unemployment although the french economy is recovering at a modest pace all of the economists and the government agree that unemployment will continue to increase until mid 2010 according to monthly statistics from the ministry of economy and employment centre the number of jobseekers has increased again in january notably by 19 500 more over the previous month increase of long term unemployment the number of long term unemployed applicants has risen by almost 5 in one year according to the published statistics of the ministry of employment the number of long term unemployed applicants registered for more than 12 months and sometimes more than three years has increased this number was 1 041 million at the end of march 2009 among the long term unemployed applicants 38 looked for a job for more than one year and 19 for more than two years stability of short time working ch mage partiel in response to the economic crisis and to limit the number of redundancies the circumstances to implement short time working were simplified in late 2008 the use of such a scheme has increased in early 2009 this increase is due to the industrial sector which in 2009 became the largest sector using short time working however according to insee s survey the number of temporary lay off and short time workers has remained stable at 144 000 in the 4th quarter of 2009 the number of people with a part time job has also remained stable at a high level i e 1 4 million 1 the national institute of statistics and economic studies 2 l indice du salaire mensuel de base smb france businesses biggest fears france the gross domestic product gdp 3 fell by 2 2 last year such a decline in france s gdp was historic the most significant drop since the post war period according to the insee however the fourth quarter of 2009 showed some improvement with a growth of 0 6 according to preliminary results from the insee which is encouraging government s helping hand france the government has implemented measures since the beginning of the crisis to deal with the economic situation among such measures are zero social contribution scheme the zero contribution scheme was introduced by the government in december 2008 the purpose of such measure is to allow small enterprises with less than 10 employees to continue their recruitment despite the deteriorated economic environment this measure has had a real success contributing to 650 000 recruitments at the minimum wage in firms with less than ten employees consequently the government has decided to extend it until june 30 2010 that is to say for any new recruitment at the minimum wage in such firms the latter is totally exempted from paying the employer s social contributions during 12 months additional allowances to part time working partial activity of long duration apld operational since may 1st 2009 apld covers situations in which the reduction of activity is planned for a long period 3 months minimum renewable without the total term exceeding 12 months in such cases in addition to the specific allowance for part time working an additional allowance is paid to the employee so that total compensation is increased to 75 of gross salary such allowance is partially funded by the government and the unemployment insurance scheme managing body the implementation of apld is subject to the conclusion of an agreement between a professional or inter professional or an enterprise and the government in return of the government s help firms are under certain obligations in terms of maintenance of employment and training recourse to assisted contract for such contracts the employer benefits from aid which may take the form of recruitment subsidies exemption from certain social contributions or training aid the general principle is to reduce by direct or indirect subsidies the costs of recruitment and or training for the employer these subsidized jobs are generally available primarily to target individuals such as those in trouble on the job market for some time or young people green shoots of recovery france although the french economy has been recovering from recession over the past nine months 2010 should still be marked by a renewed rise in unemployment indeed the recovery is very slow and the activity has still not returned to levels before the crisis all of the economists and the government agree that unemployment will continue to increase until mid 2010 according to the insee 2010 will mark a return to positive growth but it will be too modest to create jobs there will be no recovery in employment in 2010 the rate of unemployment at the end of 2010 may reach 11 employment recovery normally starts with recourse to part time and 3 produit int rieur brut pib italy temporary jobs and for the first time in twenty months the number of temporary staff has slightly increased in february 2010 which is good news current economic outlook if we look at public sector debt and interest payments greece isn t doing particularly worse than italy says peter westaway the chief economist europe at nomura international in fact looking purely at the numbers italy has the 2nd highest debt in the world compared to gdp after japan for the workers it does not get much better salaries in italy are amongst the lowest in europe in fact in a report published in may 2009 by the ocse revealed that the italian average salary is 17 less than the european average to be more specific italians earn 44 less than their english colleagues 32 less than their irish colleagues 28 less than their german colleagues and 18 less than their french colleagues source il sole 24 ore 19 may 2009 in hard numbers that figures is euro 16 000 per year or approximately euro 1 300 per month when analysising this data that of high public debt and low salaries one must also consider national regulations concerning tax and social security matters in fact in italy tax and social security charges make up 44 of labor costs that is 10 more than the european average according to eurostat italian employer s pay the highest amount of tax per employee in europe so why with all of this is italia still bella from a financial point of view italian banks are relatively conservative with their investments in that in general less exposed to high risk products when compared to financial institutions in larger countries lending practices also tend to be quite stringent despite italian banks facing the same liquidity issues as their international colleagues to date writing in march 2010 no italian banks have needed a bailout since the crisis began from an economic point of view italy could be considered a spanish armanda in business terms when compared to the united states and some of their european counterparts in their book the italian economy at the dawn of the 21st century published in 2003 authors massimo de matteo and paolo piacentini state citing official sources that in italy almost one half of total employment is accounted for by firms with less than 10 employees these firms represent more than 95 of italian firms europe according to their research is made up on average of 90 small businesses however these businesses only account for one sixth of the overall turnover in short the italian economy is largely made up of small businesses this figure was confirmed again when istat published in july 2009 its research on small businesses in italy during 2007 of particular interest is that 65 of these businesses are autonomous that is businesses with only one employee other figures illustrate that 21 of small italian businesses have 10 to 49 employees while medium business with 50 to 249 employees make up 12 6 of italian companies house hold debt is italy is quite low especially when compared to us and european counterparts a recent report issued by the oecd reports that debt in italy is 49 of disposable income compared to the 100 average for the eurozone in the uk and usa this figure is closer to 150 in fact in another report published in june 2009 by the oecd commented that on the positive side relatively healthy household and corporate balance sheets may allow italy s recovery to be on a more solid footing than elsewhere italy businesses biggest fears businesses in italy started pairing down their operations at the beginning of the crisis from a general point of view the service industry does not appear to have been hit as hard as the production sector this year one of the biggest concerns in all sectors is to do with corporate structure they need to ensure maximum flexibility in terms of the work force in order to keep their costs as competitive and low as possible the italian government through their social and wage funds is trying help businesses exactly with this government s helping hand the italian government has been proactive in its attempts to stimulate the economy they have acted on many fronts one visible area was through providing strong incentives to buy new cars in order to stimulate the automotive industry this measure though was only valid in 2009 more relative to our discussion is what they have done for businesses and the labor force italian employees and businesses have been benefiting from quite a generous government scheme which allows businesses suffering from the economic downturn to send their employees home for up to 2 years which can eventually be extended to up to 5 years with a large percentage of their annual salary paid for by the italian government it is referred to as cig cassa integrazione guadagni one of the results from the application of this program which proving extremely popular in 2009 saw an increase in its usage of 311 4 over the previous year as reported by inps in december 2009 and of 333 8 as reported by inps in march 2010 is that the employees can be reintegrated as soon as market conditions improve we will be covering this topic in depth in the following pages of this document in 2009 due to the crisis the government allocated some new measures like the cig in deroga at a regional level under certain circumstances this measure is granted to companies and employees which would normally not be able to benefit from cigs or cigo green shoots of recovery of course no one knows how the story of this uncertain economic period will unfold in the next 12 24 months in reference to italian unemployment on paper eurostat estimated the italian unemployment rate for december 2009 at 8 5 this appears to be lower than the european average of 10 for the eu 16 countries and 9 8 average for the eu 27 countries however these numbers do not take into account the italian governments cig program which in essence has employees technically still working for a company while staying home and waiting to be called back to work the cig scheme has been enormously popular in 2009 inps data from december 2009 indicates an increase from euro 223 million in 2008 to euro 918 million in 2009 in terms of authorized working hours suspended when the number employees who have been sent home on cig are calculated together with the eurostat unemployment figures then this number rises to over 10 5 which is above the european average this reporting is a similar to the difference between the declaration of the u3 versus the u6 unemployment figures in the united states however perhaps it will be this generous cig scheme which keeps employees and hence consumers with a large portion of their annual income guaranteed for 2 5 years which will ensure italy s green shoots of recovery don t turn out to be weeds united kingdom current economic outlook the financial times ft has reported on the bank of england s first quarterly bulletin for 2010 which states that whilst the recession of 2008 09 saw the economy contract by 6 2 per cent employment fell by just 1 9 per cent according to the ft the relatively small hit to employment during this recession despite its speed and severity has emerged as one of the main economic conundrums however analysis by the bank of england makes clear that the surprisingly benign response of the labor market is likely to reflect the weak wage growth seen during this downturn in this recession real wages adjusted for inflation grew by just 0 1 per cent that compares with a 7 3 per cent rise in the 1990s and a 2 7 per cent rise for1979 81 the economy also entered the previous two recessions with higher levels of inflation which abated relatively quickly leaving companies with even bigger wage bills that they then sought to cut by slashing staff there was less need for a significant adjustment in the growth of both nominal wages and prices compared with the early 1990s the bank s research says that may be one reason why more recently real wage growth has been weaker and employment stronger by contrast the fall in working hours during this recession has been nothing out of the ordinary dropping by 2 2 per cent over the past couple of years this compares with a 1 9 per cent decline in the 1990s and a 2 2 per cent drop in the 1980s the paper also records that structural changes in the labor market since the 1990s may partly be responsible for the greater willingness of workers to accept weaker wage growth the ft article goes on to note that the degree to which employment rose and fell with changes in gross domestic product has been less than half as volatile since 1993 than it was between 1975 and 1993 instead companies appear to have varied wages and hours to a much greater extent in part the unusual behaviour of the labor market is likely to reflect an increase in the flexibility of real wages relative to employment the bank suggests however according to the ft the bank is less clear as to why such a different response to recession may have arisen one argument is that companies are less willing to get rid of employees immediately fearing the costs of rehiring once the economy gets going again the ft states that the bank notes that this is one reason why there are still great risks of further increases in unemployment should demand not return as quickly as companies expect the bank also points to a small decline in unionization an increase in older people being prepared to stay on in work and a fall in the exchange rate having helped to keep down real wages additionally the paper suggests low levels of bankruptcies in this recession because of greater forbearance by lenders and authorities may have led to fewer large scale redundancies government s helping hand the uk government stepped in to save some of the worst affected uk banks at the time of the financial crisis and committed to continuing its public spending programs to stimulate the economy quantitative easing printing of new money was introduced to feed more money into the economy and lower interest rates have assisted the large population of homeowners in the uk in meeting their mortgage payments the uk will see a general election in the early summer and it remains to be seen how any incoming government or indeed coalition government will address the ongoing economic challenges united kingdom green shoots of recovery a worldwide survey of 61 000 employers conducted by manpower and reported in the financial times on 9 march 2010 suggests that britain will face a jobless recovery as it seems that employers will postpone recruiting plans until they see a sustainable demand re emerging the report suggests that in britain the number of employers expecting to increase their headcount in the next quarter only marginally exceeded those expecting a decrease according to the ft the report underlines fears that although unemployment has risen less sharply than in previous recessions recovery in the labor market is likely to be slow united states current economic outlook according to the bureau of labor statistics u s nonfarm payroll employment was little changed 36 000 in february 2010 and the unemployment rate held at 9 7 percent in some states the unemployment rate is higher for example in west virginia the unemployment rate is 11 percent in california and nevada 13 percent and in michigan 14 6 percent in comparison to a year earlier the us labor market has stabilized in january 2009 employment had fallen sharply by 598 000 and the unemployment rate rose from 7 2 to 7 6 percent in real numbers 14 9 million americans are unemployed the number of long term unemployed those jobless for 27 weeks and over was 6 1 million in february 2010 and has been about that level since december 2009 about 4 in 10 unemployed persons have been unemployed for 27 weeks or more the number of persons working part time for economic reasons sometimes referred to as involuntary part time workers increased from 8 3 to 8 8 million in february 2010 these individuals work part time because their hours had been cut back or because they are unable to find a full time job governments s helping hand the us federal government has implemented a two fold assistance program 1 extend unemployment insurance benefits and 2 a subsidy program to assist unemployed americans to maintain