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HR departments 'failing to maximise people profits'
HR News |
30/07/2010
UK businesses are failing to maximise profit from their investment in people, it has been reported.
According to research conducted by PricewaterhouseCoopers (PwC) US companies outperform their UK counterparts in terms of the pre-tax profit produced for every pound, euro or dollar paid out in remuneration.
Human capital return on investment (HC ROI) was found to have grown by a mere 4.6 per cent in the UK and 8.3 per cent in Western Europe between 2002 and 2006, however at the same time, American businesses managed an increase of 19.8 per cent.
In 2007, when the markets began to decline, the index fell by 2.7 per cent in the UK and 1.7 per cent in Western Europe, yet held steady stateside.
Commenting on the data, Richard Phelps, human resource services partner at PwC, claimed that US firms have proved better at flexing employment costs to market conditions.
"Less prescriptive rules have allowed them to adjust staff numbers and salaries where necessary. The impressive return on investment levels is starting to feed through to the dollar," he added.
"In the UK and Western Europe the more regulated environment prevents such agility. Firms here will need to find other ways to improve staff returns to compete globally with their more aggressive competitors."
According to PricewaterhouseCoopers, HC ROI can be improved in a number of ways.
Investigating the use of overtime, reviewing absenteeism, assessing benefits structures and reducing overhead costs may help British firms improve their index score, it is claimed.
PwC also argues that adjusting the balance of full-time, part-time staff and contract workers may provide human resources partners with additional flexibility.
"The downturn has highlighted the need for companies to have a clear idea of the contribution their people make to the bottom line," Mr Phelps said.
He added that a fact-based approach can help ensure decisive and transparent decision making, but companies need to ensure employees remain engaged during any subsequent changes.
According to the Recruitment and Employment Confederation/KPMG Report on Jobs, the number of both temporary and permanent job placements has continued to increase as 2010 has progressed.
Posted by John Lynes
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