Outplacement News

The international crisis and its way through the different nations has led us to Spain, which suffers from an unemployment rate of nearly 18 percent, one of the highest rates in the European Union.

The economic decrease not only causes a lower rate of divorces in this country but also an ongoing decline in prices on the property market. Hans U. Hay of Humanus Consulting, S.A., our CNI-Partner in Spain, explains the background of the current economic situation in his country.

How does the Global Crisis affect the Spanish Economy?

For more than two decades, the Spanish Economy has always enjoyed an above average growth within the European Union. This growth was primarily based upon three pillars: Construction (during some years, Spain concentrated more than 40% of the total construction within Western Europe),  Tourism ( some 40 million tourists p.a.) and Assembly Units for multinational companies. There was never really a strategic plan from any government to develop future technologies in areas such as renewable energies,  emission reductions, etc.

This led to a tremendous dependence upon ever growing GNP increases within the EU and without the possibility to adjust the Spanish economy with counter measures that would have softened the harsh landing.

Construction:  The property market, with prices around twice as high as compared with other countries, has fallen around 50 . More than a million homes are in the pipeline and the adjustment to a normal level will take several years. Many foreigners have abandoned their holiday homes because they could not afford anymore to pay the mortgages, among them many Britons because the Pound lost 35 of its value versus the Euro in little more than a year.

Tourism: Spain will have lost in 2009 some five million tourists, not only because of the crisis but also because there are new holiday destinations in the market that offer more value for less money. Places like Benidorm (also called the “Las Vegas of Europe”) are not attractive anymore which means a great effort has to be developed into more quality resorts.

Assembly Units:  Spain has lost its competitive edge over other European countries and many companies close down their production sites and move to Eastern Europe, Morocco or even back to their own countries. Without own technology, there is no replacement in sight.

This year the public deficit will be in the region of 10 – 12%, and the forecast for 2010 is around 8%. The number of unemployed will grow from 2,3 millions at the end of 2008  to 4,2 millions at the end of 2009. The 2010 budget forecast is based on 4,4 millions  or close to 20% of the active population.

The GNP contraction in 2009 is put by the Government at 4% (possibly optimistic) and the 2010 Budget forecasts minus 0,3%, also optimistic. The recovery of the Spanish economy is primarily based upon the principle of hope: If Germany recovers, France gains solidity and Italy survives thanks to its thousands of small and medium competitive enterprises in the north and despite Berlusconi, Spain will also rejoin the circle of growing economies.

What does the Spanish Government do in order to stimulate its economy? Basically nothing except applying measures too late copying other countries. And what is worse, el Presidente Zapatero has just announced tax increases of 11 billion euros for next year which – listening to experts – is about the worst thing to do in times of recession.

This brings us to another important issue:

How do companies reduce personnel, what is the role of Outplacement in this process and what happens with the reform of the labour regulations?

It is nowadays not too complicated to reduce personnel, be it on an individual basis (without a redundancy plan approved by the local government) or larger scale redundancies which have to be authorized beforehand.

The problem is of economical nature: Executives are entitled to an indemnity of 20 days per year of service based on the last income and “normal employees” to 45 days. Sometimes in the past, companies wanting to accelerate the closedown of a unit, paid up to 60 days in order to get a quick agreement of the worker´s committee.

In buoyant times, companies could afford to “invest” large amounts in layoff payments and outplacement programs because the crisis was local, which means the head office provided the funds when the subsidiary did not have them. Now we are talking of a global crisis and for the first time, the liquidity problems go through the whole organization.

This leads to a negative impact upon the Outplacement Market: Companies just cannot afford anymore an on top payment for outplacement and simply tell the employee that it is not possible and he accepts it. Sometimes it may be necessary to invest some money in outplacement because the workers or the committee are very adamant in trying to get a good settlement. In such cases, the company provides for some form of outplacement, but generally at lower level and with shorter periods.

So, on the contrary of what outplacement companies counted upon, an increase of business has not materialized. In addition to that, since around 40% of search firms have gone out of business,  “one man shows” are turning up pulling the fees down, not offering a minimum of quality assessment and coaching and not providing a network that took years to build.

Concerning Labour Regulations, here are positive signs at the horizon, because the Minister of Labour has publicly admitted for the first time the need for reforming the laws which he expects should lead to an improvement of the productivity and a reduction of temporary contracts. This can only be reached by reducing the indemnity levels although he did not expressly say that. So even in times of crisis there can be positive aspects.

Then we still have the good weather, excellent food and drink and the Spanish Way of Life that helps us to get through the crisis. It will be overcome!  And one thing is certain: After this one, there will be another one!  Hopefully not in a long time.

Hans U. Hay

Humanus Consulting, S.A.

September 27, 2009

www.humanusconsulting.com
Contact: Hans Ulrich Hay