The year in HR

A look back at 2004 through the eyes of Canadian HR Reporter
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|Canadian HR Reporter|Last Updated: 08/15/2005

Canadian HR Reporter

’s year-end review searched the archives to put 2004 in perspective.

PRIVACY

Day One of 2004 saw federal privacy legislation, the Personal Information Protection and Electronic Documents Act (PIPEDA), take effect as the default privacy law of the land.

Outside Quebec, which has had its own privacy legislation since 1994, provincially regulated businesses joined their federally regulated counterparts in conducting sweeping audits of how they collect, store and disclose personal data and documents. (Ottawa later approved Alberta and British Columbia privacy legislation.) But while employee data remain outside PIPEDA’s purview in federally regulated industries, organizations in the provincially regulated sectors have to review how they handle reference checks, employee surveillance and a whole host of HR practices.

One HR practice that received considerable scrutiny in 2004 was the outsourcing of data processing and storage. In B.C., a public-sector union raised alarm over the government’s intention to outsource the management of health information and some employee records to an U.S.-based firm. Invoked was the spectre of the USA Patriot Act, which allows federal authorities investigating terrorist activities to access records on more relaxed grounds than are usual.

B.C. privacy commissioner David Loukidelis invited views on the matter, and after reviewing some 500 submissions, determined there is indeed reason for concern. Noting that the Patriot Act has been used in “ordinary criminal investigations and has expedited surveillance in a myriad of circumstances,” the privacy commissioner said once personal information crosses borders, “regulating its use is at its best difficult and at its worst impossible.”

He called for measures to mitigate the risk, including a law making it an offence for a public body or a service provider to send information outside of Canada. Pre-empting his finding, the B.C. government tabled a bill amending the province’s public-sector privacy law to require government and public-sector organizations to ensure personal data managed by outsourced firms not land in the hands of foreign government agencies. The bill does not address private-sector data outsourcing.

(Oct. 22, article #3459; Nov. 8, article #3487.)

At the federal privacy commissioner’s office, workplace-related complaints repeatedly touched on the question of employee monitoring. One employer was found in violation of the law by having two web-cams pointed at employee work areas, with the purpose of ensuring security and monitoring productivity. Citing excessive intrusion of privacy, the commissioner’s office called for cameras’ removal. While the use of cameras “may prevent undesirable behaviour, it also forces the employee to call into question every potential action, every potential comment no matter how benign.”

(Nov. 22, article #3535.)

HEALTHY WORKPLACES

Organizations may have learned to keep a firm grip on physical disability, but they’re still watching stress and mental illness push up the costs of long- and short-term disability. Stress and overwork are a significant source of rising costs. In their third report on work-life balance, professors Chris Higgins of the University of Western Ontario in London and Linda Duxbury of Ottawa’s Carleton University found that people who are overworked or overburdened by work and family demands are more likely to visit the doctor, check themselves into emergency rooms and ring up hefty pharmacy tabs. Extrapolating from their survey of 32,000 respondents, the authors peg the costs to the health system at $5.8 billion a year. There’s a cost to employers’ well-worn strategy of downsizing and cost-cutting, and that cost is being picked up by taxpayers who fund the health system, say the authors.

(Dec. 6, article #3572.)

Legislators are starting to take note. In Quebec, a prohibition against psychological harassment took effect on June 1, and within six months, the Labour Standards Commission had received some 1,200 complaints, of which 40 were withdrawn because more than 90 days had lapsed and 50 were withdrawn because the complaints didn’t fit the scope of the law. Some 40 cases have been resolved by employers taking steps to address the incidents or put in place policies to prevent future cases of harassment, as they’re required to do by the law. Only one case is proceeding before a labour standards tribunal.

(Jan. 26, article #2960.)

Courts, too, are beginning to recognize the toll of stress and overwork. A wrongful dismissal case involving the Bank of Montreal concluded with an Ontario Superior Court judge ordering the bank to pay an ex-employee $15,000 for intentional infliction of mental suffering. The employee had been drained “by too many months of unreasonable work demands,” ruled the judge. The employee went on disability leave twice, but the bank took no step to remedy the workplace problem. Hence, the bank did not have cause to dismiss the employee for refusing to return to work as doing so would have been “medically disastrous,” the judge found.

(Jan. 12, article #2942.)

And on the safety front, a 68-year-old Toronto-area man has been charged with criminal negligence causing death for his role in supervising the digging of a trench which collapsed, killing one worker. This was the first time criminal charges were laid under new federal legislation, C-45, also known as the corporate killing law.

(Sept. 27, article #3407.)

HR’S ROLE

The role of HR professionals continues to be a much-debated topic. In a survey of HR leaders at 200 organizations conducted by the University of Toronto’s Centre for Industrial Relations, 31 per cent of respondents still consider HR an administrative function, compared to 41 per cent who consider HR a strategic partner. The survey also found that just one in three respondents measures HR effectiveness and efficiency across the organization, a figure that hasn’t much improved since 1994. The two areas of performance most commonly measured are lost time and productivity.

(Feb. 23, article #3002.)

What to measure was the subject of a discussion paper by the American think-tank, the Human Capital Institute. Toronto-based author David Creelman wrote in that paper that simple big-picture metrics such as employee engagement, absenteeism and turnover are numbers that HR need to track, but it’s a waste of time to calculate return on investment on isolated initiatives. “There is a pro-measurement school that argues, ‘If you can’t measure it, you can’t manage it.’ That is nonsense — unless it is merely a rebuke to those who refuse to look at any numbers at all,” wrote Creelman.

(Oct. 25, article #3463.)

With technology’s growing prominence in day-to-day HR work, HR professionals have had to learn the needed skills to manage HR information systems. (Aug. 9, article #3334.) In organizations that outsource HR functions, HR managers have also had to learn a new set of skills related to vendor management. At BMO, for example, HR training curriculum has been revised to include skill sets such as project management, risk management, financial management and process management.

(March 22, article #3087.)

HR OUTSOURCING

As a concept that threatens (or promises, depending on who you ask) to completely transform the profession, HR business process outsourcing continued to generate interest — and debate — in 2004.

In February, Calgary Health Region completed a deal to outsource almost two-thirds of its HR department when 165 employees were transferred to new HR outsourcer Telus Sourcing Solutions.

(Feb. 23, article #3004.)

Just 55 HR employees remain inside the Calgary Health Region HR department, explained Duncan Truscott, vice-president of people and learning.

“Most of the transactional activities have gone — 95 per cent of them have gone — but so have some of the areas which we would consider to be more strategic,” he said. Telus took over recruitment and occupational health and safety, including long-term planning, and will be expected to come up with strategies for reducing absenteeism.

Jim Westcott, a market analyst with business technology consulting firm IDC Canada, said HR outsourcing, particularly large-scale, multi-process outsourcing like the Calgary Health deal, continues to garner a great deal of interest.

“We characterize it as a growth market,” he said. One reason for this is that more vendors are positioning themselves to provide multi-process solutions. Also this year, Hewitt and Exult merged to form one of the largest HR outsourcers in the market serving large organizations with more than 10,000 employees, while other firms like Accenture and Ceridian made moves to target smaller organizations, those under 10,000 employees.

Meanwhile, a survey of 127 HR leaders by Watson Wyatt, concluded that though outsourcing deals are often driven by a desire to cut costs, many organizations do not know the true cost of internal HR delivery, making it difficult to determine the value of having the services delivered externally

(May 3, article #3175).

“If you are not defining your cost structure, who is? The answer is almost always the HR vendor,” said Ed McMahon of Watson Wyatt.

Later in the year, another survey, this one by the Conference Board of Canada, suggested outsourcing is way down on the list of HR’s priorities.

(Dec. 20, #3584)

HR professionals are too busy thinking about things like finding the next generation of leaders, performance management and increasing worker productivity to be exploring outsourcing possibilities, said Prem Benimadhu of the Conference Board.

“If you ask any vice-president of HR (about top priorities), I doubt if many of them will say outsourcing,” he said.

But Daniel Skarlicki, a professor of organizational behaviour and human resources at the University of British Columbia disagreed. “There is no question (outsourcing) should be a strategic priority,” he said. “HR leaders should consider outsourcing most of their functions unless doing so compromises the company’s competitive position.”

PENSION WOES

The year began with many organizations nursing pension plan headaches — the pain got a lot worse come mid-year.

Most defined benefit pension plans found themselves in deficit positions in 2004, and so HR leaders had CFOs and shareholders looking over their shoulders demanding solutions.

A small survey of 68 CFOs by Watson Wyatt and the Conference Board of Canada found 59 per cent believe there is a pension crisis.

With companies facing pressures to make larger contributions to support pension funds, cash flows get squeezed. Once that happens CFOs become much more interested in what’s going on, said G. Edward Reed, senior researcher with the Conference Board of Canada. “The pension underfunding issue has moved from the HR department to the CFO and of course to the board of directors.”

In response to funding concerns, many organizations were reviewing pension plan design and looking at options like reducing benefits or even making the switch from a defined benefit to a defined contribution plan.

(May 17, article #3200.)

Other research from the Certified General Accountants Association of Canada concluded almost 60 per cent of all defined benefit pension plans are in deficit. The association warned that without changes, plan sponsors and members are facing a “looming social and economic crisis.” Plan members could see benefits reduced while inadequately funded pension plans run the risk of bankruptcy.

To close the deficit, plan sponsors facing a shortfall would have to increase contributions by an average of 10 per cent of payroll in each of the next five years.

Mark Zigler, an employee-side pension lawyer, said the alarm is overheated. Many plans may be in deficit, but that does not automatically mean the employer or plan sponsor is facing imminent demise. There is no reason to panic or make sweeping changes, he said. “In the long run the pension system generally rights itself.”

But the perspective of plan sponsors and their champions is very different. Flaws in the system are causing many organizations to look at ways to get out of offering a DB plan and move to a defined contribution model, said Steve Bonnar, a pension expert with Towers Perrin.

“If we go the way we are going without dramatic changes, (DB plans) will die a slow death,” he said. They will be closed to new entrants so that over a protracted period of time the plans will simply disappear. Most notably sponsors fretted over surplus ownership and awaited a decision on the long, long-standing Monsanto case.

(July 12, article #3298.)

The decision finally came in late July, and sponsors were very disappointed.

The Supreme Court of Court ruled that a number of Ontario employees affected by a partial pension plan windup were entitled to some share of any surplus that existed at the time of the windup. Critics, and there are many, charge the decision could encourage former plan members from other defined benefit pension plans to make similar claims costing employers millions in payouts.

Since 1998 Monsanto Canada had been trying to wind up a portion of its pension plan after laying off 146 employees. The windup proposal was rejected because it did not pay laid off employees a share of the $19.1 million actuarial pension surplus that existed at the time. Monsanto said the employees were only entitled to a share of the surplus at the time of a full windup.

The Supreme Court disagreed and said Ontario’s pension legislation meant for affected employees to be treated as if the pension plan was winding up in full. The fear is that the decision could encourage former plan members from other defined benefit pension plans to make similar claims costing employers millions in payouts.

(Sept. 13, article #3370.)

Though there were signs of improved pension performance late in the year, ramifications of the Monsanto case were still being explored though many experts predict they will be far-reaching and painful, leaving many plan sponsors reaching for extra-strength Tylenol as 2004 came to a close.

SKILLS SHORTAGES CLOSE?

Another year older, another year closer to retirement, another year closer to the mass exodus of baby boomers from the workforce? Again, it depends on who you ask.

“There is no evidence that Canada is facing a looming general shortage of skilled labour as direct result of demographic aging,” conclude the authors of one study published by the Canadian Policy Research Networks.

There is a high likelihood of localized skills shortages but an aging workforce is a not a “crisis” but a “challenge” that can be managed with careful planning.

For example, more effort must go into encouraging phased retirement and better flexible workplace practices to get people to work longer, said report author Julie Ann McMullin from the University of Western Ontario, in London.

Training older workers to take on new positions would also be helpful. But too many employers retain a bias against older workers and won’t spend the money to upgrade their skills. “There is a reluctance to invest in people age 45 and older.”

(Sept. 13, article #3375.)

And yet, skills shortages, both immediate and projected, already had HR professionals concocting strategies to find the requisite skilled labour that will enable their organizations to continue to grow and thrive.

In Western Canada, the labour need is particularly great with continued expansion in the Alberta oilsands and preparation for the 2010 Olympics in Vancouver driving demand for skilled workers.

The Olympics alone is projected to spur $13 billion in construction work and 132,000 jobs in next few years.

A survey of 76 industry associations by the Canada West Foundation (CWF) found many industries expect at least some labour shortages between 2005 and 2010. Almost one-half expect shortages to be severe.

Addressing shortages will require strategies to make better use of immigrants and Aboriginal peoples, and improving labour mobility by making it easier for skilled tradespeople to move from province to province, said Ben Brunnen, a policy analyst for the CWF.

(June 14, article #3264.)

According to the Canadian Apprenticeship Forum, which launched a new campaign to promote the trades in the fall, in the steel industry, 45 per cent of all tradespeople are expected to retire by 2006; in the natural resources sector, 35 per cent of workers were aged 45 or older in 2001; in the construction industry, one in eight workers are 55 or older.

Employers need to be persuaded to make apprenticeship opportunities available, said Keith Lancastle, executive director of the Canadian Apprenticeship Forum. Unfortunately, he added, some employers fill their own staffing needs by poaching from a competitor down the street.

“As the entire baby boom cohort approaches retirement, (employers’) ability to (poach) will be significantly reduced,” he said. The solution lies in “getting employers to recognize that an investment in apprenticeship makes good business sense in the short, medium and long term.”

(Oct. 11, article #3439.)

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