Budget 2011 & Employment


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Budget fever is here again! One day when I have time on my side, I want to delve into the stories behind budgets. I will dig up the conflicts over setting budgets and delivering results. Is it only about the numbers or the power games behind the numbers? I will analyse why some HR professionals blow their budgets 6 months into the year without much to show, while others perform better, way below budget. If you have a budget story to share, drop me an email.

Budget 2011/2012

When the Minister of Finance, Pravin Gordan presented the “mini budget” (Medium Term Budget Policy Statement) in October, many HR professionals were too busy extinguishing the flames inside their companies, to scrutinise government’s priorities until 2013.  To summarise the long winded statement, national treasury kept fiscal policies constant, revised their three year GDP growth forecasts higher and allowed for additional borrowings by parastatals. Too many billions in debt, enough to scare any South African

This month, we can expect more of the same in the Budget speech, perhaps with the odd surprise lurking in the documentation.  (Middle and higher income earners should not hold their breath for tax relief)

So we will once again hear about the legacy of apartheid, never mind that it is 17 years later and sounds like a broken record. We will be reminded about the impressive achievements, from the number of houses to fans at the World Cup. However, many achievements are at the bottom of Maslow’s hierarchy of needs and we are in no hurry to climb up. Then we will learn about how well SA has weathered the economic storm (or is this wishful thinking?). Finally, the Budget Speech will discuss the long, long road ahead. The same goals are carried forward to another year: create millions of jobs, provide quality education from grade R to graduation, grant access to health care, expedite service delivery, invest in rural development and clamp down on crime.  I’m not convinced. In the absence of radical changes, these goals are unlikely to be achieved in the next decade. We need a concerted effort from government and business to manage the troublesome twins of employment and education. I’m going to focus on employment this month, and later in the year, education.

Long Term Employment

If you study the long term employment figures of many companies, they are likely to be employing fewer people today than 2001 and are planning to hire even fewer by 2021. During buoyant times, we experienced jobless growth and when the economy dipped, employers rush to retrench staff (over 1 million to date). What will it take to increase employment levels in your company?  Here are 3 suggestions for the Budget to sway your decision: 

1. Easy to Hire & Fire

I was chatting with a wealthy business man that immigrated from SA to Sweden. He mentioned that he would never employ staff again. In his opinion, the cost of hiring and firing staff in SA, from the red tape to the onerous regulations overshadowed the benefits of doing business here.  We often underestimate the non-employment wage costs of various pieces of legislation (compensation, labour, employment equity and skills development). These days, he contracts skilled professionals online, from India to China and upon delivery of results, settles through Paypal.  He has used this flexible model for virtual assistants, IT developers and accountants.

To encouragement employment, make it easy for employers to hire and fire staff. Instead of hundred check boxes, provide a user friendly system that quickly safeguards the rights of employers and staff. And reduce non-employment wage costs. Or stated differently, it should be as easy as SARS E-Filing and using Facebook.

 2. Tax Free Holidays

Go beyond the traditional carrots for learnerships and skills development levies.  We have millions of unemployed workers and massive tax incentives are required. I suggest a tax free holiday for those employers that increase employment levels by 50% within 5 years. The fiscal coffers will drop in the short term, but think about the higher tax collections from more people joining the employment line, instead of the unemployment one.

3. Pact

Employers have to walk a tight rope between the above inflation wage demands of trade unions and employing more staff. We can’t have real remuneration increases outstripping labour productivity and expect job creation. If employers are worried about strike action year after year and higher employment costs, they will be cautious about increasing headcount. Government, trade unions and business should enter into a long term pact; for higher employment levels and lower employment costs.

Now if only I could wave a magic wand for these suggestions to materialise this month…

(HR Future, February 2011)

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