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Employee return on investment increased by 19% in Romania during the past two years, according to this year’s edition of the PwC Saratoga study
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Employee return on investment increased by 19% in Romania during the past two years, according to the PwC Saratoga Romania 2010 study. This indicator measures the human capital return on investment, which shows the pre-tax profit produced by an employee for every euro, dollar, or RON paid out in remuneration.
Also, the costs of labour as a percentage from the total costs of the companies decreased from 12.2% before the crisis to 9.3%. At current levels, the Romanian costs of labour are more than half the labour costs incurred by companies in Western-Europe.
“With a 1.53 average rate of human capital return on investment (HC ROI), Romania has a similar standing with the United States and is 30% above the Western European ranking from this point of view. This should not be understood as the result of higher productivity levels in Romania, but it’s the result of the lower remuneration/revenue indicator in Romania”, explains Peter de Ruiter, Tax and Legal Services Leader, PwC Romania.
The economic crisis has lead to a stagnation in the labour market, a fact highlighted by the falling rate of resignations, which decreased from 18.3% in 2008 to just 8% last year. Companies have sought to maintain their existing employees and the external recruitment rate dropped by 75% compared to the 2008 levels. Yet, the involuntary termination rate increased seven times, reaching 7.3%.
“Romanian companies have a lower rate of internal recruitment - 1.3% compared to the European average of 4.3%. This indicator shows a significant decrease as compared to the 2008 level, when Romanian internal recruitment rate was 11.1%, which means that companies have sought to maintain their existing labour force, but have also significantly reduced the number of promotions or lateral movements within the firm. Decreasing of revenue and lack of promotion opportunities influenced employees’ morale, a fact that results in higher absenteeism, lower engagement rate and an increase in unproductive behaviours”, added Peter de Ruiter.
A particularly high rate of absenteeism was recorded among the management level employees in the financial services sector (12%). The high number of absences may generate high costs for the companies, as well as an unhealthy working environment.
The companies from the consumer goods sector reported the lowest revenue per full time employee, a lower remuneration level compared to other industry sectors and a low rate of engagement, as expressed by the high absence rate (4.2% for the entire sector).
The telecom and technology sector reported the highest revenue per employee, counterbalanced by a high costs per employee. This industry has also a low rate of absenteeism (just 3.2%), yet a higher than average staff turnover rate, especially in the case of specialists (14.3%).
The industrial products sector was severely hit by the economic crisis, with low revenues per full time employee and a high rate of dismissal. Companies had to cut labour costs in order to survive the difficult market circumstances.
“PwC is of the opinion that there is a growing unrest within the labour force and we might witness a higher turnover in the labour market once the economic recovery will start to pick up. It is therefore imperative for companies to start working on staff loyalty as soon as possible in order to prevent a talent haemorrhage, once the labour market turns in the favour of the employees once again”, concluded Peter de Ruiter.
The past two years have also marked a steep deterioration of other relevant indicators for human capital engagement. The absence rate increased by 13,4% from pre-crisis levels, which shows that Romanian employees are less engaged with their employers and are passively resisting the difficult and unpopular measures taken by many companies in order to manage the cost of labour. This caused an upsurge in the costs of unmotivated absence for employers, which grew by 36% in Romania to 3,942 RON per full time employee annually.
According to the PwC Saratoga Romania 2010 study, the companies’ investment in training decreased by 50% in the past two years, yet the number of training hours offered to employees remained constant, a fact explained by the higher usage of internal training as opposed to the more expensive external training.
There is also a growing tendency for companies to externalize their human resource activities (a 70% increase in the number of companies using outsourced human resource services), which lead to a decrease in the cost of the Human Resource department within the companies’ total costs, from 0,32% in 2008, to just 0,17% in 2010.
In Central and Eastern Europe, employee return on investment increased by 28.6% in 2009, as companies reduced their headcount and average unemployment in the region reached 10.3% last year.
The PwC Saratoga Romania 2010 study presents comprehensive data on the human capital performance indicators and financial function performance indicators from different economic sectors. The report is based on data collected from 58 participating companies from four different industries (telecom and technology, industrial products, consumer goods and financial services).
The report suggests numerous possible avenues for increasing HC ROI. These include investigating the utilisation of overtime; reviewing absenteeism; adjusting the balance of full-time, part-time staff and contract workers; assessing benefits structures, and facilities and overheads costs.
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information..
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