Closing the gap between classroom and workplace

“I always wanted to be a graphic designer,” says Kenton Robbins, business coach and regional director for Yorkshire and Humber at the Institute of Directors (IoD).

“When I left school, I sat down with the careers advisor and told her this. She said: ‘Don’t be stupid, there’s no future in graphic design.’ Some 25 years later, here I am, in a world led by design.”

Plus ça change – or should that be ‘nihil mutatur’ for those of you educated in the post-war ‘golden age’? Education secretary Michael Gove may believe in a gilded age of education and opportunity, but the above is a reminder how easy it is to view the past through one of the five million pairs of rose-tinted glasses the NHS distributed in said 1950s.

From lousy school career guidance to an expectation of university education, from courses in horse care and fish husbandry to classical Latin and History, from selective grammar schools to access for all, education has always been a political hot potato guaranteed to instil fear and worry in any government – and parent.

Now it is back at the top of the agenda once again, thanks to the UK’s shocking youth unemployment of 1.03 million, a figure that has been rising since the early 2000s. At 22%, UK youth unemployment is the second highest in the G8, after Italy. One in 10 people aged 15 to 19 is ‘not in education, employment or training’ (the so-called NEETs) – among the highest in the OECD.

The Audit Commission estimates the cost to the taxpayer of these NEETs will be £13 billion over their lifetime, in terms of welfare payments, costs to health and so forth – and a further £22 billion in terms of loss to the economy and to their families.

Education results are poor, relative to spending in this country. Some 18% of 15-year-olds in the UK do not reach the OECD/PISA baseline Level 2 of literacy. Yet the UK spends more on children than most OECD countries, at just over £90,000 per child from birth up to the age of 18. This compares to an OECD average of just under £80,000.

The UK is slipping down the educational ladder and everyone has a view as to why this is: poor teaching, lack of discipline, or a system based on points and league tables that leads to a perverse incentive to offer qualifications that inflate results. Government interference, government ambivalence, terrible career counsellors that have never worked in business, lazy teachers, stressed teachers, bullying Ofsted inspectors, poor pay, high pay and too much holiday to boot, egotistical heads, bad parenting, badly behaved children… the list is endless.

But is this blame game helping anyone? And where are those that matter most in this debate, the young people society is letting down and the people who want to employ them? For the stark fact is: the gap between the classroom and workplace is growing.

A report jointly released last month by the Work Foundation and Private Equity Foundation reveals there has been a major rise in young people who are either unable, or taking longer, to make the first move from education to work. The report, Lost In Transition?, finds nearly half of NEETs in England now have no experience of sustained paid employment, beyond casual and holiday work. This represents more than 450,000 young people who have so far been unable to make the transition from learning to work.

Focusing solely on academic achievement is a red herring. With the exception of careers where a particular academic attainment at a high level is vital, for example, medicine or chemical engineering, it is less about getting eight A* grades at GCSE and more about helping children with employability skills – the somewhat detrimentally named ‘soft skills’ that are key to success in today’s workplace.

“The labour market has changed considerably over the past few decades. First jobs are now less likely to be in manufacturing and more likely to be in the service sector, where skills such as communication, teamworking and customer service are important. For young people without the soft skills needed to access work in these growing sectors, finding employment has become increasingly difficult,” says Work Foundation researcher and report author, Paul Sissons.

The number of young people leaving school and college with serious shortfalls in their employability skills is still high, according to the CBI/EDI Education and Skills Survey 2011. Some 55% of employers say they experience weakness in school leavers’ self-management skills and 69% believe they have inadequate business and customer awareness. Even among graduates, the picture is worrying, with weaknesses identified in teamworking skills (20%) and problem-solving (19%).

Meanwhile, almost half of the employers report widespread weakness in core workplace skills among existing employees, with literacy and numeracy topping the list.

“Potential employers such as myself are dubious about the present value of A-levels and degrees now that they are available to the majority of students. We are confused by the new range of qualifications aimed at vocational studies, with the various credits and supposed equivalent qualifications. At the same time, we remain disappointed how often students are not well prepared for work,” says Kevin Caley, managing director of Midlands-based company, Business Loan Network.

“As a former motor industry training officer, venture capital fund manager and now the founder of a rapidly growing small business seeking to employ its first junior staff, I am acutely aware of the difficulties facing school-leavers in this economic climate and of the confusion among small business owners. It is a problem that faces us all and unless it is addressed effectively, our economy and society will suffer for generations.”

This issue is top of mind for CBI members, says James Fothergill, CBI head of education and skills policy. The CBI is due to release its latest skills survey next week and early indications are little has changed.

“Our members are only so concerned about grades. This is really about competency,” says Fothergill. “What consistently comes out top in our education and skills survey are issues around teamworking, communication skills and self-management. Members are most satisfied with IT skills, but unimpressed with school leavers’ ability to get up on time and their business and customer awareness. We are concerned there is a mismatch between the level of competency and what is needed to succeed at work.”

It is tempting for those in the educational establishment to view such comments as ‘education-bashing’, but Fothergill is quick to point out that employers are keen to work with schools and colleges to help address this issue. “Business is not going to get anywhere if it carps on the sidelines. Employers need to roll their sleeves up and get involved in mentoring, apprenticeships and providing career information and guidance.”

But is it the responsibility of employers to close the gap and take on a teaching role? According to the CBI’s study, half of employers now support careers advice and one in four provide school governors. A third have increased their school engagement activity and two-thirds have built links with secondary schools. Two-fifths of employers are providing remedial training to school and college leavers

There is a vested interest in business getting involved in education and helping to close the gap. It enables it to access a greater pool of young people, helps develop leadership skills in existing employees through mentoring and coaching, is good for reputation, can be part of a CSR strategy – and finally helps build loyalty in the local area.

“It is our responsibility to get involved,” agrees Debbie Conroy, HR training and development manager at Rank Group, which works closely with Jobcentres in the area of work experience and which is in the process of launching an apprenticeship scheme. “It is to the benefit of the employer, to the economy and to the country as a whole.

“But,” she adds, “schools do need to start preparing students so that, when they go for an interview, they have already been given some idea: things such as how to do a handshake, how to put a CV together, ensuring their shoes are clean. It’s dog eat dog out there and students need to realise it is no longer about hugs all round – they may be going up against their best friend.”

“It has become the responsibility of employers to teach and this is costing them a lot of money,” adds Andrew Humphries, a dealmaker for the UK Government Global Entrepreneur Programme and co-founder of the Attitude Academy, which provides corporate-style attitude and motivational coaching specifically for 13-to-18-year-olds in school. “But it is not the employer’s role. They are there to tell people how to do their job, not how to do life.”

Frank Bowley, deputy director of the skills strategy unit at BIS, the Department of Business, Skills and Innovation, believes, despite an investment of some £50 billion annually in training staff, employers are “not good at engaging more fully with more formal education” and that there may be ways of incentivising business to shift the pattern of this spending to get better results.

“Business should engage with education, but in my opinion it doesn’t need to do as much as it thinks,” retorts Humphries. “This is not about great big investments and programmes, it is about inspiring and sowing seeds at a young age. It should not break the bank.”

The problem, according to Humphries, is that society is not addressing the fundamental questions that are having an impact on how young people view work.

“We have changed as a society and there is a generational difference in the drive of people,” he says. “For so long, we have expected that companies should provide employment throughout our working lives. There has been a slow slide into the expectation that society will provide. We expect business to owe us a living, so we can meet our expectations of a house, two cars and holidays. Now we are asking, ‘why is the country not providing me with the environment to get all this without much effort?'” He contrasts this with people in the US, where the expectation is to work harder and be better than the competition. “We need a better attitude to work and to take responsibility for our happiness and our lives,” he says, “and we need parents to stop abdicating responsibility to the state and business. The problem is, many of today’s parents are not skilled themselves and we are going to find we have skipped a generation.

“We now need to concentrate on the next generation, the 13-18-year-olds. And, most importantly, we need to help these kids understand how to set goals, for the short, medium and longer term.”

This view may rankle with some, but it chimes with business. The consensus is that, if we are to close the gap between the classroom and education, we need to start earlier with children, foster relationships between teachers and local businesses, including mentoring, put more emphasis on teaching children about today’s workplace and the type of skills required and, most importantly, help parents and children to understand their responsibilities.

This is no easy task, so no wonder politicians, the educational establishment and some in business prefer to concentrate on their war of words. But there are ways forward that do not involve ripping up and starting again, taking retrograde steps and retreating to a ‘golden age’ or throwing money down a bottomless pit.

“The old system is not fit for purpose,” says Marius Frank, CEO of curriculum development organisation and awarding body Asdan (see box, right). “We are building our education on sand. But that does not mean we should start again. We need to supplement and complement this system, not dismantle it. One of the fundamental reasons we have still have this problem in education is the tool by which we choose to justify performance and success: the exam.

“It is easy to judge individual success in an exam. It is harder to judge soft skills. The didactic information transfer has failed. It is anticipated that young people today may have seven different careers in their working life and we now need to help develop thoughtful, creative, equipped children who aspire to move from shop floor to boardroom. The way to do this is to legitimise and build out of classroom learning and help the teacher become learning manager, not teacher.”

This view correlates with the OECD’s Skills Strategy, released last month, which shifts focus from a quantitative notion of human capital, measured in years of formal education, to the skills people acquire, enhance and lose over their lifetimes. “Governments need to raise the quality of education and training at all levels, so that investment in skills development is effective and people leave education not only with a qualification/diploma but also with the corresponding skills,” it says. “Clear certification of learning outcomes and recognition of non-formal learning are incentives for training.”

The report adds: “The demands placed on teachers to improve student skills cannot be underestimated” – and in addition it suggests teachers work collaboratively with people in other organisations, in networks of professional communities and in different sorts of partnership arrangements.

To enable this, the IoD’s Robbins says academics need to be less wary of business people – and vice versa.

“Many teachers are high in IQ, not EQ. If you shake a teacher’s hand, they can feel uncomfortable, yet it is the first thing you do in business. Academics look at things differently to businesspeople and can be intimidated,” he says.

“But then you also get businesspeople who think teachers have an easy life, getting 12 weeks off a year. They think they can turn up at a school and treat it like being in a business. Businesspeople need to take the time to understand education and the school. There is an opportunity for a group to deliver orientation for school mentors before they go in.”

Robbins says businesses need to build trust and coaches/ mentors need to become regular figures within the academic environment, not just dip in and out. CBI’s Fothergill agrees and says business cannot expect teachers to innately understand the business world.

“Career guidance is the responsibility of individual schools and you can’t expect all head teachers to come up with cohesive schemes. We are expecting people who are not qualified to provide this guidance. Teachers have enough on their plates. We can’t hope they understand what is out there,” he says.

Rank’s Conroy points out: “Many teachers have never had an interview as we know it in business.”

But there are signs teachers want business to help in understanding all this. Kim Liddiard, a former HR director at publishing group Haymarket, the Forestry Commission and BskyB, has just launched YourFutureYourLife, a business dedicated to supporting young people by identifying their skills and ambitions, building self- confidence and self awareness as well as an appreciation and awareness about the work environment.

“Head teachers are saying, ‘we can help academically, but we haven’t a clue how to help our students find the right path or what employers want’. They are crying out for help,” she says.

Liddiard is working with individual 14-year-olds and about to start a school pilot. She believes the biggest issue is helping young people move from dependency of childhood to independency in adulthood in an age of ‘cotton wool kids’ and league tables.

“Parents are doing everything for children these days and there has been a tendency for some parents to view their children as an extension of themselves and their success. Meanwhile, schools want their students to become doctors and lawyers and universities want first class degrees, so they can get their research funds.”

The result, she says, is confusion all round for young people who have little understanding about financial education, career options or what lies ahead.

“One student told me she was taking media studies. I asked if she realised there were more people taking media studies degrees than jobs in the media? Graduates are saying they have been sold a pup. They think if they get a degree there will be a job at the end; instead, they are ending up in call centres with large debts.”

If the gap between classroom and workplace is to be closed, all stakeholders must play a role. At policy level, the Government needs to consider what ‘qualification’ means in the 21st century.

Young people should not have to narrow down subjects so early and greater emphasis must be put on skills in the curriculum. Government also needs to consider how it measures performance. Liddiard adds: “As an HRD in business, I always say, be careful what you measure. It changes behaviour.”

At educational level, teachers should view business with less suspicion and instead find ways of working with it.

There needs to be more emphasis on career education, rather than it being viewed as what Asdan’s Frank describes as “minor fluff in the navel of the school curriculum”.

Employers need to develop sustainable relationships with schools, not just ad hoc ones that look good on their CSR report.

There may be a greater role in employer funding in education to be considered by policy- makers. Business also needs to engage with children in education at an earlier age.

As the CBI’s Fothergill says: “We tend to forget how capable a 10/11-year-old can be, if given the opportunity.”

Parents and children need to take ownership of their future. The role of parents cannot be ignored and the CBI will be considering the employer view on this issue later this year.

Where there is a huge unexploited area is in taking the HR skills of mentoring and coaching into the classroom. If there is one thing business could do immediately, and inexpensively, to help close the gap, it would be to go into schools and inspire.

The consequences to society and the economy of not closing this gap are severe. “We know if young people haven’t got on the first rung of the job ladder by 24, they will suffer the consequences for the rest of the lives,” says Shaks Ghosh, chief executive of Private Equity Foundation. “Some will never work.”

But the benefits of closing the achievement gap in the UK are overwhelming. A study by OECD, in collaboration with the Hoover Institute at Stanford University, suggests narrowing the gap by bringing all students to a baseline level of minimum proficiency for the OECD could give GDP increases in the UK of $6 trillion.

Even a 14-year-old must know that’s a lot of zeros.

City & Guilds: supporting more young people into work

Of all the challenges our country faces, the number of unemployed young people will cause the most long-term damage. Unemployment has been rising steadily over the past few years and alarmingly almost a quarter (22.2%) of 16-24-year-olds are out of work.

The good news is that there is a tremendous amount of energy and goodwill within the Government, as well as in the education sector and industry more broadly, to reverse this trend. The £1 billion Youth Contract was launched, there is a renewed focus on apprenticeships, and business bodies such as the CBI are launching initiatives aimed at tackling the crisis.

While we acknowledge and welcome all solutions, at City & Guilds we feel there needs to be a more cohesive strategy across Government that gets to the heart of the issue and, crucially, is geared towards supporting young people. We need to bring together key stakeholders from across education, business and the Government to ensure more young people don’t slip through the cracks. Unfortunately, some initiatives, such as the Youth Contract, give cause for concern, because the number of agencies involved overlap – and confusion and inefficiency can arise, all of which is letting young people down.

We need a single group of MPs representing all political parties whose sole focus is to increase youth employment and represent the voice of young people. It would be a group that would debate and critique proposals and provide balanced recommendations on effective strategy to address the issue of youth employment.

Crucially, this group would listen to young people, to create better-informed, long-term solutions.

In February this year, City & Guilds commissioned the first comprehensive study of young people’s views around education and employment since the current economic crisis began, in order to bring the experience of young people into the debate.

Based on this rationale and armed with the results from the study, on 1 May we called for an all-party parliamentary group (APPG) with a particular remit to investigate and make recommendations on: careers guidance, apprenticeships for young people, entrepreneurship and work experience. David Miliband (Labour), Stephen Lloyd (Liberal Democrat) and Graham Stuart (Conservative) are all keen to explore the idea further.

We believe that as the UK’s leading vocational awarding organisation, we are well equipped to drive this work forward, which will seek to get to grips with the root causes of youth unemployment.

I see the APPG functioning in a number of ways. First, we would work to develop careers guidance that is fit for purpose, engages young people and leads to better employment outcomes. In addition, we would consider the reasons behind the decline in the number of young people (16-19) taking apprenticeships and ways to encourage greater participation. Consideration will also be given to the type of support the Government should offer entrepreneurial young people to enable them to set up in business on their own.

We must take action now to ensure young people get the advice, experience and teaching they deserve. Politicians, employers, policy-makers and sector leaders must start working together to get young people working.

Chris Jones is CEO and director general, City & Guilds

ModBac: well rounded

Charitable social enterprise, Asdan, an awarding body providing courses to 6,000 UK and international schools, colleges, youth centres and training providers, has a mission to build an enduring culture of achievement.

In a study of more than half a million pupils by the Bristol Centre for Research in Lifelong Learning and Education at the University of the West of England, Asdan’s Certificate of Personal Effectiveness (CoPE) was last month shown to help pupils achieve greater GSCE success. The study found young people who passed CoPE raised their chances of achieving A* to C grades in English by 10% and achieving five A* to C, including English and maths, by 5%. The impact was most significant in those in less privileged educational groups.

Now Asdan chief executive Marius Frank, who last year won the HR Excellence Award for Most People-Focused CEO in the public/not-for-profit sector, has set his sights on helping employers and schools find a way through the minefield of qualifications and skills with a tool to help close the gap between the classroom and workplace.

The Modern Baccalaureate (ModBac) is what Frank describes as an award for the 21st century.

ModBac provides a framework to accredit not only high standards and knowledge, but also the application of that knowledge and development of skills in real-life contexts. “The existing position is highly confusing for employers, due to performance measures,” says Frank.

“As someone who was a head teacher, I have sympathy for them, what with diploma this, that worth three GCSEs – and so on. It is tempting to always revert to the yardstick you understand – basic GCSEs – and then the system becomes self-perpetuating.”

ModBac identifies seven areas of learning and achievement that build competence and character, thereby leading to a whole education experience.

These are: IT/computing; foreign language/international; enterprise/financial capability; work experience/careers education; community/citizenship; personal challenge; and extended project.

Both existing academic attainment through the curriculum and external informal learning are recognised within this – for example, skills gained through belonging to the Scouts or through competitive sport.

The benefit to employers is visibility of school leavers’ overall skills and development. For example, the skills passport element takes in self-management, problem-solving, working with others, presentation and discussion, among other areas.

Schools register learners with the programme and this opens a web-based transcript. This keeps a record of qualifications completed and grades achieved, but also enables learners to upload evidence of their wider learning and participation.

The learner ends up with a certificate that shows all the achievements. Each certificate will feature a unique QR code that, when scanned, links to a secure website holding all the details of the learner’s qualifications, skills and wider achievement.

“This saves time for employers and gives them a standardised overview of attainment, plus a rounded view of the child,” explains Frank. “It is like an electronic CV that has already been securely verified by the school.”

Asdan launches ModBac next week with a pilot group of schools. “It is a movement. You don’t have to do it,” says Frank. “But everything we have done to design the ModBac is there to help children achieve more through a transparent portfolio of evidence of their skills. It helps to redefine what success looks like and we hope businesses give it a chance.”

HR Magazine

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It’s more important for women to be likeable than competent when aiming for promotion

Academic research reports it is more important for women to be ‘likeable’ rather than good at their job if they want a pay rise or promotion.

New research from Melbourne Business School has found that it’s more important for women to appear ‘likeable’ than ‘competent’. Professor Mara Olekalns, who teaches negotiation management as part of the MBA curriculum, found gender stereotypes were still in place whilst investigating the persistent 17% wage gap between women and men.

She said: “The issue in negotiation is that the behaviour we normally associate with strong negotiators – competence – is also male gender stereotyped. This means that when women increase their competitiveness by demonstrating their competence, they violate their gender stereotype which prescribes that they appear more accommodating and relationship focussed.”

Olekalns’ research reveals part of the explanation for the pay gap is women are often their own worst enemy by being reluctant to negotiate. And when they do negotiate, they ask for less. But in spite of this, she says that harder negotiating is often not the answer.

She added: “For women, negotiating harder often invokes a backlash effect where they get a poorer performance evaluation because they lose on ‘likeability’. They can be subjected to nasty comments in the office because they are perceived to be acting pushily.

“My advice to women is to start any negotiation by building rapport through general chit chat. Find common ground and use it to clearly signal that you have the same values and goals as the person you are negotiating with.”

HR Magazine

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UK gender pay gap is typically over £4,907 annually

UK men typically earn between £4907 and £7491 annually more than women, according to a survey released yesterday.

The salary survey was carried out by online finance tool, and the results analysed by Dr David Fishwick, head of maths at Bradford Grammar School. It found that the gender pay gap in the UK is typically over £4,907. The results showed that the median salary was £29,120 for men and £24,000 for women.

In its 2011 annual survey of hours and earnings, the Office for National Statistics (ONS) found that the pay gap had been reduced to less than a 10% difference and said it demonstrates gender pay equality was still an important issue.

Fishwick commented on the survey: “Although men are generally better paid, they also have a wider range in salary. There is less variety in women’s salaries.”

Dr Catherine Hakim, Professor of Social Science at the Social Science Research Centre in Berlin, confirmed this across Europe: “It is well-established that women work in a narrower range of jobs than men. Now we know that their earnings are also heavily clustered around the average, whereas male workers include lots of high-earners and also lots of low-earners.”

The EU recognises the problem of workplace gender inequality, which plans to enforce gender quotas in a bid to increase the number of women on boards of business, as reported by HR magazine last week. The proposals, however, have faced strong opposition from the UK. Four days ago it managed to gain enough support from EU member states to block the proposal to impose a 40% female quota on company boards.

HR Magazine

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European court to rule on UK discrimination law

A bid to change religious discrimination law in the UK has been taken to the European Court of Human Rights today.

Four Christians who had complaints of religious discrimination against their employers rejected by employment tribunals and courts in the UK, are arguing that the law here does not do enough to protect the religious beliefs of workers.

If the landmark challenge is successful, legal experts say that it would have wide ranging implications. Any resulting change in the law or the way it has to be interpreted would apply to all UK organisations.

“Since the claims against individual employers were rejected, the battleground has shifted. It is now the law itself that is being challenged and, by extension, the state,” explained Simon Rice-Birchall, partner at international law firm Eversheds.

The cases of Ladele and McFarlane v UK, and Eweida and Chaplin v UK, will be heard by the European court from today.

In 2010, Nadia Eweida and Shirley Chaplin both lost religious discrimination cases against their respective employers – British Airways and the Royal Devon and Exeter Hospitals NHS Trust. Their claims centred on incidents where they were asked to remove their crucifixes at work for being in breach of uniform policy.

“If the court upholds the complaints made by Mrs Eweida and Mrs Chaplin this could, in effect, introduce a duty on employers, where reasonable, to accommodate workers’ desires to manifest their religious beliefs,” continued Rice-Birchall.

“Similar duties exist in the US and Canada, but only where making an adjustment would not cause undue hardship to the employer. However, although this would involve a shift in legal focus, it will still be the case that employers only have to make adjustments where it is reasonable to do so.”

He added that past European cases suggested the claimants might struggle to persuade the court that an unjustified infringement of their rights had occurred, particularly when the option of resigning was available to them if they felt strongly about acting on their religious beliefs.

The European court ruling is expected in several weeks, but Prime Minister David Cameron has already indicated that a change to UK law to enshrine the right to religious symbols in the workplace could be imminent.

Last year, a group of senior bishops raised concerns that Christians in the UK were being unfairly discriminated against or sidelined in the workplace, while staff of other faiths were treated more sensitively.

People Management

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‘450 degree feedback’: extending the value and power of 360

The classic 360-degree-feedback model – feedback from your boss, peers and the people you supervise – is tried and tested, and is used in many organisations in many different ways. By getting structured feedback on specific behaviours and skills, individuals have a powerful tool for understanding where they are now and how to get to where they want to be.

Consequently, the “360” is a critical element in the development of managers and leaders, individuals aspiring to or starting in new roles, and in career, talent and succession planning. It’s also a great starting point for individual coaching and mentoring discussions and helps line mangers to have meaningful goal-setting discussions with their individual team members.

What is 450-degree feedback?

Many organisations are now extending the scope of 360-degree feedback to include more contextual feedback from additional contributors, in a process that has been dubbed “450-degree feedback”. By creating tailored, multi-participant feedback tools that are designed to match the organisation’s critical skill sets and culture, and adding feedback on how the individual fits in with the culture and expectations, the information will be richer and more valuable. Including stories and examples from colleagues in critical roles also provides a more in-depth feedback experience which is then more useful for determining what changes the individual needs to make.

In-depth feedback to support coaching and succession planning

In one organisation, where building a strong executive succession team was seen to be critical to the future success of the company, the 450-degree feedback idea was incorporated into the coaching programme for each executive in the succession pipeline.

The company’s own 360-degree feedback tool was supplemented by creating between 20 and 30 questions about the coachee’s specific job challenges and priorities. Each coachee then identified colleagues who were best placed to provide feedback. As well as online feedback, the coach also conducted a number of confidential interviews with those colleagues.

The coach used a structured interview to obtain the feedback but was also able to supplement the feedback by asking further questions and obtaining additional insights. These included feedback on the individual in the context of the organisation’s culture and its expectations. For example, one executive who thought she was communicating effectively was not being seen that way because she was ignoring the collegiate and consulting culture of the organisation and this was seen as a severe restriction in her being able to hold a future leadership role. Her coach was then able to work with her to develop a plan for how she could change her communication style. Follow-up 450-degree feedback was used some months later to check up with the same stakeholders on whether they had observed a difference in those specific areas.

450-degree feedback for key promotion decisions

At GlaxoSmithKline, the 450-degree-feedback process was used to get additional data on three CEO candidates. In addition to the regular 360 feedback, the three candidates were provided with in-depth feedback based on their specific role and the context in which they worked – the feedback came from 14 internal executives who had worked directly with all three. So there was both an element of 360, plus an element of competition and comparing of the three candidates. The raters were asked what were the candidates’ best and worst decisions, their strong and weakest leadership qualities, whose capabilities were most suited to meet the challenges ahead and whose style best matched the company’s values.

The process resulted in the least likely (in this case the youngest) candidate being given the job, but broadly it was seen as a highly effective way of obtaining comparative data where all candidates were pretty strong and where the right decision was critical for the organisation.

Additional effort

It is clear that using the 450-degree feedback approach requires additional design, resources and coaching over and above a standard 360 feedback. However, where getting the right people into the right roles is critical for the organisation – as in the examples above – the cost of making the wrong decision can be much more costly.

Personnel Today

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Is auto-enrolment the first step on a road to wholly employer funded pensions?

The Olympic Games have passed without incident; meaning only two major events still have the potential for cataclysmic consequences for the UK in 2012. The first event is the ‘2012 phenomenon’, which comprises a range of eschatological beliefs, claiming transformative events will occur on 21 December 2012. This is the end-date of a 5,125-year-long cycle in the Mesoamerican Long Count calendar.

Fundamentalists believe the 2012 date marks the end of the world or a similar catastrophe and scenarios suggested include the arrival of a ‘solar maximum’ of exceptional strength, with the radiation from the sun wiping out life on the world – or Earth’s collision with an object such as a black hole or perhaps a passing asteroid.

The second event is the commencement, next month, of pensions auto-enrolment.

It seems ‘scholars’ in the pensions field have been debating the eschatology of the pensions agenda, as we know it, for the past 5,125 years – well, 20 anyway – as the numbers of defined benefit (DB) pensions, most notably final salary schemes, have diminished in all but the public sector. This gave rise to defined contribution (DC) pensions, where staff and employers both contribute to a pensions pot.

The Government launched its much-anticipated stakeholder pension in April 2001, aimed at helping more people provide better for their retirement. ‘Stakeholder pensions’ were designed as ‘second pensions’ in addition to the basic state pension, which was seen by experts as being ‘unlikely to provide enough income’ for most people in their retirement.

They were intended as an alternative to personal pensions for those without access to company (occupational) pension schemes.

Then pension simplification took effect on 6 April 2006 – felt to be so important it was named ‘A-day’. It was a policy announced in 2004 by the then Labour government, to rationalise the tax system applied to pension schemes. The aim was to reduce the complicated patchwork of legislation built up by successive administrations and seen as acting as a barrier to the public when considering retirement planning.

The aim was to encourage retirement provision by simplifying the previous eight tax regimes into one single regime for all individual and occupational pensions.

Six years later and two years into Coalition, state pensions have definitely been at the top of the Treasury’s agenda this year. In his Budget statement in March, the chancellor of the exchequer George Osborne announced a flat-rate state pension of £140 per week.

But with the removal of the default retirement age, a need for longevity in pensions annuities and too many employees retiring to receive meagre occupational pension pay-outs on top of their state pensions, the Government has moved to help employers take the pressure off the state by investing more in their occupational pensions to support their staff in retirement.

All the changes, development, simplification (?) and noise around occupational pensions schemes now seem to be leading to one decision – auto-enrolment. This comes into effect for the UK’s largest companies less than a month after you will read these words and will mean that, by 2017, every employee in the UK must be automatically placed, by their employer, into a pension scheme.

The rules are simple: employers will be required to auto-enrol eligible employees into a ‘Qualifying Workplace Pension Scheme’ (QWPS). The QWPS will be either an employer-sponsored pension arrangement that satisfies quality tests, or a National Employee Savings Trust (NEST) arrangement.

Eligible employees will be those aged between 22 and state pension age, who have earnings above the standard personal tax allowance of £7,475 (in 2011/2012 terms). Employees at other ages will be able to opt in, as will employees who have earnings above the primary threshold for National Insurance contributions (currently £5,715). Qualifying staff must be auto-enrolled within the first three months of employment, but employees can request to be enrolled earlier and the employer is obliged to act on this. Individuals can opt out of the QWPS, but employers face financial penalties if they induce this. Employees choosing to opt out will face auto-enrolment every three years.

So with staff being auto-enrolled into occupational schemes, it seems the penultimate piece of the Government’s jigsaw to move retirement benefits from the state onto the employer is being slotted into place – but will the last piece be mandatory enrolment?

Will it become the norm that employers, not the taxpayer, fund the retirement years of the population?

In short then, is auto-enrolment a prelude to Armageddon of the state pension?

“Mandatory enrolment is the way the Government plans to remedy the pensions crisis,” says Robin Hames, head of technical, marketing and research at consultancy Bluefin. “Mandatory enrolment will be more effective than auto- enrolment and more politically desirable. But then again mandatory enrolment will always have the stigma of being seen as a tax by employees.”

And James Biggs, head of corporate pensions at Lorica Employee Benefits, agrees: “I don’t know if I am a visionary, but I have been interested in the Australian model of mandatory enrolment for about 12 years. I’d love to get to age 67 and have something from the state – but I’m just not convinced I will. I just have reservations that the financial climate doesn’t lend itself to businesses having increasing pension costs.”

Pensions minister Steve Webb has publicly said if the auto-enrolment legislation does not go far enough to encourage staff to save more for retirement, he would legislate further. And with plans in the pipeline to investigate “simplifying” income tax and National Insurance contributions into one single payment, ears have pricked up. Some experts have gone so far as to claim this could be one more paving stone on the route to employers replacing the state in funding pensions – with legislation, as in Australia, forcing them to contribute to employee retirement pots.

Sylvia Spencer, partner and head of the tax and company secretarial departments at Russell New, a West Sussex-based firm of business, tax, and charity advisers, is one such believer.

“It is inevitable auto-enrolment will lead to compulsion,” she asserts. “The Government can’t afford to fund state pensions – but compulsory enrolment into pensions could be perceived as a stealth tax. The Government’s only option would be to increase NICs and this would be unpopular.

“It’s all a bit cloak and dagger at the moment, but employers that are not prepared to help with this are short-sighted. Making such changes to pensions will be politically easier for the Government.”

One employer who is keen to get on with mandatory enrolment is Mel Missen, VP HR for EMEA at data marketing company, Acxiom.

He says: “I don’t see auto-enrolment as a positive step. It will be an administrative nightmare. It is political and not economic and those that can’t afford to contribute, won’t.

“The system is flawed, the contribution rates set [8%] are pitiful and this is a pathetically ridiculous waste of time.

“Mandatory enrolment will be better. It will reduce the burden [of administration] on employers and it will allow them to project costs effectively. From a professional perspective, this would not be an issue for us, because we offer a good pension plan. I believe in a state pension system, but ultimately I believe in personal responsibility to save.”

But should it be the duty of the employer to take on the obligation of the state pension?

Alan Morahan, principle in DC consulting at pensions advisory firm Punter Southall, doesn’t necessarily think this will be the case.

He explains: “While the aim of pensions legislation is to move the burden of retirement funding away from the state, it won’t involve the abolition of the state pension – this would never be grabbed. I also think the amount of support from employers is varied. Some are doing a lot around pensions, rousing interest among staff and introducing high contributions, whereas some would argue they are there to provide employment and pay a wage.

“This opens a debate as to who should pay for retirement.”

Logan Anderson, head of customer relations at not-for-profit occupational pension scheme, the Pensions Trust, adds: “The proposals to bring together income tax and national insurance should lead to employers taking a lot of pressure off the state with regards to retirement savings for the lower paid. For those higher up the income scale, the Government should probably expect these to be covered by the basic (universal state) pension, plus any private savings. For those at the lower end of the income scale, Government is hoping private provision will encourage more personal responsibility by members, thus reducing the burden on the state. Does this mean employers are taking the pressure off the state? If you like, but with employees.

“I would suspect that occupational pensions might replace the state pension. I could see a situation where the basic universal pension becomes means-tested, at least in part, athough the Government has said no such thing and I wouldn’t expect it to, because this is a real vote-loser.”

Matthew Mitten, a partner at pensions communication advisers Secondsight, elaborates. “These are very troubling questions,” he says. “We are so used to the state providing a pension for us and although you would never see a politician saying it, I can’t see that it’s anything but a case of the state giving pension responsibility to employers.” But he adds: “Either this, or individuals will have to pay for retirement. In the ‘KiwiSaver’ model in New Zealand, auto-enrolment is in place, but it is the employee that has to pay more, not the employer. The Government has to find a balance, so employers and employees can share the cost, but not view this as a pensions tax. And there is the issue of how the media negatively reports on pensions.”

With the media furore surrounding dwindling pension pots and frequent news reports and damning headlines about changes to pensions in the public sector and the proposed end to final salary schemes for public service staff, confidence in occupational pensions among employees has, perhaps understandably, fallen in recent years.

The Department for Work and Pensions published research in July showing a drop of 15% in employees’ pension savings since 2007.

Only a quarter of private sector employees are active members of their employers’ pension scheme in the UK (26%), down from a third (31%) in 2007. Only 31% of private sector organisations currently offer any pension provision for their staff, down from 41% in 2007.

This strengthens the Government’s argument to nudge – and then potentially compel – employees into pension schemes. The research found, post auto-enrolment, that 45% of firms without a current workplace scheme intend to enrol all their employees into NEST. A further 11% say they will set up their own scheme, while 5% say they will use a combination of both.

But one point the pensions industry does agree on is that contributions totalling 8% of salary (the minimum proposed by the Government) will not be enough for an employee to retire comfortably on.

Secondsight’s Mitten explains: “If an employee were to start pension contributions of 8% when he or she in their 20s and their fund performs ‘OK’, they will receive about a third of their salary in retirement. If they start pension contributions of 8% in their 30s, it is more likely to be less than 25% of their salary.”

Rachel Boughan, head of auto-enrolment at Mercer, adds: “With auto-enrolment, the Government has gone for a softer option than mandatory enrolment and this is a huge challenge for employers, but I think the biggest problem here is the contribution rate; 8% is just not enough.

“In Australia, the rate is already being pushed to employer contributions of 12%. In the UK, the difficulty will come if employees believe 8% contributions are enough to retire on and then retire seeing that a big amount of savings has not come home to roost.

But she adds: “The Government will be more likely to implement mandatory enrolment if auto- enrolment opt-out rates are high. If the take-up is good, its next move will be to increase contributions.”

But the experts are unsure about what a good rate of take-up on pensions would be.

Anderson thinks a 50% take-up rate would not be deemed successful and the Government would hope for a take-up rate in the region of 80%.

But according to Bluefin’s Hames, it could be as late as 2027 before any further changes to pensions legislation take place.

He adds: “A 70% to 80% participation rate [in DC pensions] will probably be achieved over the next five years. If this is deemed a success when auto-enrolment is reviewed in 2017, then the debate over mandatory enrolment could be, at least, postponed, probably for a decade, to allow the auto-enrolment concept further time to bed in.

“The Government won’t want to keep occupational pensions under constant review. In the meantime, the focus will be on simplifying the state pension structure before any moves are made to connect it to auto-enrolment.”

Richard Wilson, senior policy adviser at the National Association of Pension Funds (NAPF), agrees. “It has always been the plan to make enrolment into pensions mandatory, but for the meantime the Government will be focused on making auto-enrolment work and then contribution rates. At the moment, it looks like auto-enrolment will get people into saving.” But as one era of the pensions calendar ends and a new one dawns, for the most part, while holding its breath, the pensions industry – as well as employers such as Axciom and House of Fraser (see box) – are waiting with an air of optimism.

Morten Nilsson, CEO of auto-enrolment provider, NOW: Pensions, says: “I am optimistic. This is the start of a massive change, when everyone working will be enrolled in a pension. Contributions will go up past 8% quickly and there are some good pension products out there.

“It is a strange position, though, because while there is limited faith in pensions now, we have a chance to change this,” Nilsson added.

Spencer is more cautious. She adds: “For people whose pension funds have been pillaged as they near retirement, I hope there is a more rosy future. We are moving in the right direction – but while we have a global leading welfare system, this is what can cause governments to go bust.” But Broughan believes the onus is on employers – and indeed wider society – to take responsibility for pensions as early as possible.

“Communication is the key to the success of pensions – or else there will be a massive fall-out,” she asserts. “Pensions legislation will be useless unless the communications and management of saving are right. Employees need to engage with saving – and I would like to see this culture start as early as in schools.”

And on the topic of pensions eschatology, she muses: “If the communications around encouraging employees to save is right, we have got to be optimistic about the future. If not, then I will wait for pensions to implode.”

Like the Mesoamerican Long Count calendar, time could be running out.

NAPF: Pensions Quality Mark

The National Association of Pension Funds (NAPF) launched its pensions quality mark (PQM) in September 2009.

PQM recognises DC pension schemes with good governance and communications, and with a total contribution of 10% (with at least 6% from the employer).

Age UK, the charity that aims to improve later life, last month became the latest employer to achieve PQM status.

PQM distinguishes pension schemes that are well run by employers, whose contribution rates are good, and that are clearly communicated to members of staff.

Jane Vass, head of public policy, Age UK, explains:
”It is more important than ever for people to plan for their future, and offering a good pension is a vital step in helping our staff prepare for what’s ahead.”

Age UK is one of the 157 organisations to be awarded the PQM, which now covers 300,000 scheme members, including 1,050 of Age UK’s staff. Other holders include Volkswagen, L’Oréal and Michelin.

Case study: House of Fraser confirms new pension scheme

House of Fraser is a department store group with 63 locations across the UK and Ireland and employs 7,300 House of Fraser staff and 11,000 concession staff.

In a bid to pre-empt auto-enrolment legislation, the company launched a group personal pension (GPP) for its 7,300 UK employees in July, following a thorough review of the company’s pension arrangements.

The launch date coincided with the closure to future accrual of House of Fraser’s defined benefit (DB) scheme at the end of June 2012.

The GPP has been designed to: lower charges for active members than had been available in their previous defined contribution (DC) scheme; provide more effective communications and member support, to reflect the Pensions Regulator’s focus on the importance of employee engagement; improve administration and scheme governance; be ready to meet all auto-enrolment requirements ahead of the staging date; and be suitable for all employees, including House of Fraser’s auto-enrolment population.

It is hoped House of Fraser’s contract-based, defined contribution scheme, provided by Aviva, will reduce the costs associated with the scheme for active employees by 35%, compared to the previous stakeholder scheme.

Suzanne Willshire, House of Fraser’s pensions manager, explains: 
”We wanted to ensure our brand and values are instilled through the pension scheme and we worked with the communications team at Johnson Fleming to create bespoke literature and engaging launch campaign materials.

“We have also developed a pension microsite to enable all employees to manage their retirement planning online. We included group presentations and individual meetings as part of our structured communications plan.

“Targeting key messages to different groups of employees is important, as we are rolling the new scheme out over several months. Employees who were previously members of our DB schemes were invited to join first. Those who were in our stakeholder scheme are being invited to join now and we will then move on to [remaining staff].”

Australia: three pillars

Australia has a three-pillar pension system. The first, public, pillar, is made up of a means-tested, tax-financed old age pension that provides basic benefits; the second is made up of funded individual pension accounts provided by superannuation funds; and the third pillar involves individuals contributing to their superannuation funds or to retirement savings accounts (RSAs).

Apart from the Military Benefits Superannuation Scheme, most public defined benefit (DB) superannuation schemes are now closed to new members.

Australia introduced compulsion into occupational schemes in 1992, when it made contribution into the superannuation fund system mandatory for all employees older than 17 and younger than 70 earning more than $A450 a month.

This is a defined contribution (DC) system that requires a minimum contribution to a superannuation fund.

The country has several superannuation funds, including industry-wide funds and retail funds, which are offered to the public and to employers by financial service providers. Employees may make voluntary contributions and employer contributions are subject to an annual cap of $A50,000.

Employee contributions are matched by a factor of 1.5 additional up to $A1,000 per year by the government. This matching contribution is made for employees earning less than $A58,980. Employer contributions are tax-deductible up to certain limits, while employee voluntary contributions are entitled to limited tax breaks. Pension payments, too, are entitled to tax breaks, but these are under review.

Denmark: bringing home the bacon

Danish employees are automatically entitled to a state pension. Many people also have a company pension or a collective pension as part of their contract of employment. It is also possible to set up a private pension scheme on top of this.

Anyone who has lived in Denmark for 40 years after turning 15 years old is entitled to a full state pension. The Danish state pension is paid to people over the age of 65. Statutory pension schemes are supplementary pension insurance schemes that are split into two different contributions.

Company pensions are a common feature in Danish employment contracts and are considered an important complement to the state pension scheme. Employees are usually offered this pension scheme during the recruitment process. Between the worker and the employer, approximately 15% of the employee’s salary is paid as a contribution to the scheme. Companies in the private sector often have an agreement with a pension fund, which offers an additional health insurance policy, covering disability, critical illness and death.

Employees are also able to set up a private pension scheme with a pension fund or a bank. Their level of income will normally determine whether the money will be paid out as a single payment (capital pension scheme) or in instalments.

US: a ‘safer’ option

In the US, employers are allowed to automatically enrol their employees into 401(k) retirement savings account plans, requiring employees to actively opt out if they do not want to participate. Until 2008, the 401(k) required employees to opt in.

Employers offering automatic 401(k)s must choose a default investment fund and savings rate. Employees who are enrolled automatically will become investors in the default fund, although they are still permitted to select different funds and rates if they wish, or even to opt out completely.

Automatic 401(k)s are designed to encourage high participation rates among employees. Therefore, employers can attempt to enrol non-participants as often as once per year, requiring those non-participants to opt out each time, if they do not want to participate. Employers can also choose to automatically escalate participants’ default contribution rate, encouraging them to save more.

The Pension Protection Act of 2006 made automatic enrolment a ‘safer’ option for US employers.

Prior to the Pension Protection Act, employers were held responsible for investment losses as a result of such automatic enrolments. The Pension Protection Act was designed to create a safe harbour for employers in the form of a Qualified Default Investment Alternative (QDIA), an investment plan that, if chosen by the employer as the default plan for automatically enrolled participants, relieves the employer of financial liability.

Under US Department of Labor regulations, three main types of investments qualify as QDIAs: lifecycle funds, balanced funds, and managed accounts. QDIAs provide sponsors with fiduciary relief similar to the relief that applies when participants affirmatively elect their investments.

New Zealand: super-size me

The ‘KiwiSaver’ is a voluntary, work-based savings initiative to help with long-term saving for retirement. It is designed to be hassle-free, so it is easy to maintain a regular savings pattern.

There are a range of membership benefits to encourage staff to save. They include a $NZ1,000 kick-start, regular government contributions and an annual member tax credit paid by the Government. Some people may also be eligible for help with the deposit on their first home.

Private sector companies called ‘KiwiSaver providers’ manage KiwiSaver schemes. Employees can choose which KiwiSaver provider to invest their money with.

KiwiSaver is not guaranteed by the government. This means employees make investment choices in a KiwiSaver scheme at their own risk.

For many people, the KiwiSaver option will be work-based. This means staff receive information about KiwiSaver from their employer, and KiwiSaver contributions will come straight out of gross pay. If employees choose to join, contributions are deducted from pay at the rate of 2%, 4% or 8% (employees choose the rate) and invested in a KiwiSaver scheme. The employer must contribute at least 2%.

For those that are self-employed or not working, individuals agree with a KiwiSaver provider how much they want to contribute, and make payments directly to them.

KiwiSaver savings will generally by locked in until staff are eligible for NZ Super (state) pension (at age 65), or if they have been a member for at least five years (if they joined over the age of 60).

Staff may be able to make an early withdrawal of part (or all) of their savings if they are: buying their first home; moving overseas permanently; suffering significant financial hardship; or seriously ill.

NZ Super provides for a basic standard of living in retirement, but it may not be enough for the kind of retirement employees expect. Having a KiwiSaver account doesn’t affect employees’ eligibility for NZ Super or reduce the amount of NZ Super they would be eligible for.

Instead, KiwiSaver savings are intended to complement NZ Super saving to provide people with a better standard of living for retirement.

HR Magazine

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HRDs not committed to diversity

HR decision-makers in the UK are paying lip service to diversity strategy, but they are not following this through with strategic action, HR magazine can exclusively reveal.

HR surveyed 271 HR directors, chief executives, MDs and HR managers to find out if diversity is a strategic imperative in UK business, or just a ‘nice to have’.

Some 28% of respondents said diversity and equality were at the very core of their business, 17% said it was ‘a top priority’ and 37% said it was ‘high on their list of priorities’.

Although only 11% said it was ‘not a business imperative’ and 8% said it was ‘unimportant’, just over half (57%) of the total sample had a diversity strategy.

One in five of the employers surveyed online (20%) admit to ‘monitoring diversity regularly’, in lieu of a comprehensive diversity strategy. While 9% say they ‘plan to introduce a strategy’, more than one in eight employers (14%) have no plans to put such a plan in place in their organisation.

Commenting on the survey, Helen Wells (pictured), director at diversity campaigning group, Opportunity Now, said: “Employers seem to be saying diversity is vital, but what they appear to be doing is just paying lip-service; it’s very much business as usual.

“It is encouraging employers are saying the right things about diversity and equality, but how can they engage their employees with these issues if they don’t have a strategy?”

Looking specifically at the strands of diversity, although 82% said diversity and equality were either core to their business, a top priority or important to them, 16% are doing nothing to address age equality, 46% are ignoring sexual orientation, 37% are not addressing ethnic origin, 18% are not implementing gender equality measures, 19% do not have any disability initiatives in place and a massive 70% are not addressing diversity and inclusion dependent on nationality.

In spite of this, 64% agreed the most important reason to have a diversity policy was to attract and retain the best talent from the largest pool; 45% said it was to support and relate to customers they serve and 55% believe a diverse workforce leads to an increase of new ideas and better collaboration all round.

A third (33%) said it is fair and appropriate to give a chance of employment to everyone applying for a role and this was one of their top three reasons for valuing diversity.

Wells added: “Respondents have seen the commercial imperative in diversity strategy, but if you always do what you’ve always done, you’ll always get what you’ve always had.

“Diversity needs a strategy and a route map. It needs to be part of a mainstream business process and people have to be made accountable. Employers will not be able to have a more diverse and inclusive workforce unless they have measures and data in place looking at talent management [and diversity] together. This needs to feed back into the business case for having equality in the first place and the effects will be successful and dynamic.”

HR magazine surveyed 271 HR decision-makers online during June, July and August 2012. Of the sample, 17% were CEOs or MDs, 24% were HR directors or heads of HR and 21% were HR managers.

HR will publish the full results and analysis of the findings in the October issue of the magazine

HR Magazine

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Young people increasingly shut out of first jobs according to Work Foundation report

More than 450,000 young people have been unable to make the transition from learning into work as employers have increasingly changed what it is they look for when hiring, with many under-25s in the UK unable to match the skills needed, according to a new study.

The report from the Work Foundation argues that as jobs have moved from production to service-led roles over the past decade, employers increasingly require “softer” skills such as good communication or working as part of a team more than technical ability.

The think tank said many young people are finding it hard to get their foot on the career ladder, because the education system has not adapted to reflect the changes and their skill sets are not in demand.

The report comes ahead of official “Neet” (not in education, employment or training) figures, which on Wednesday are likely to show a substantial number of young people are “falling through the gaps”.

Almost half a million youngsters in England have no experience of sustained paid employment beyond casual and holiday work, said the think tank.

Dr Paul Sissons, the report’s author, said: “The labour market has changed considerably over the past few decades. First jobs are now less likely to be in manufacturing and more likely to be in the service sector where skills such as communication, team working and customer service are important.

“For young people without the soft skills needed to access work in these growing sectors, finding employment has become increasingly difficult.

“A period of worklessness while young can detrimentally impact peoples’ careers over the longer term. More needs to be done to support young people at this crucial point of transition, and local service provision must be geared up to address this aim.

“This requires consistent support and effective co-ordination of services across local government, schools, employers and the third sector to prevent more young people from falling through the gaps in public provision.”

The report raises concerns about recent changes to careers advice and guidance services, which have divided responsibility for support between schools and the new service.

“This leaves potential gaps around 16-18 year olds and there is a real danger that the changes will leave some young people with insufficient and inconsistent support when they need it most,” the report said.


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Employers continue to struggle to fund wages that keep pace with inflation according to latest CIPD report

Good management to support employees and maintain employee engagement is more important than ever

Despite welcome news today that inflation dropped to 3% in April, the Chartered Institute of Personnel and Development (CIPD) is warning that employers are continuing to struggle to close the gap between basic salaries and the cost of living. The prediction is based on the CIPD’s Labour Market Outlook survey of more than 1,000 employers, which shows that pay award expectations for the next 12 months have fallen to 1.5% from 1.7% compared with three months ago*. Public sector organisations’ predictions of average basic pay awards of 0.3% will continue to lag behind those organisations in the private (2.2%) and voluntary sectors (1.7%).

Due to the continued uncertain economic outlook, most companies (51%) remain unable to predict whether salaries will rise or not over the next 12 months, mostly saying that the decision will depend on their organisation’s performance at the time. It is private sector services firms (56%) that are most uncertain about what their next pay decision will be, with manufacturing and production being less tentative (43%). In addition, 21% of those employers questioned have already decided to postpone any pay decision until later on in the year.

Among those companies that have been able to forecast a pay rise, the average award is below inflation at 2.6% and the main causes for the expected increase are affordability (62%), inflation (55%) and employee productivity and performance (52%).

Charles Cotton, rewards advisor at the CIPD, comments: “Our data shows that many employers are keen to raise pay in line with inflation but are struggling to close the gap as inflation remains stubbornly high. Line managers and HR professionals need to look at how they can continue to keep employees engaged and performing well in the absence of substantial pay rises, while at the same time limiting the impact of financial distress on employees by offering financial education, debt counselling and voluntary benefits packages.”

* These figures are the average across all firms surveyed, and therefore include pay increases, freezes and decreases. It excludes bonuses, incremental increases, overtime and impact of regrading exercises.


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No fault dismissal plan expected to be shelved

Whitehall is expecting Downing Street to abandon its support later this summer for one of the central recommendations in a controversial report by a Tory donor which called for companies to be given the right to sack workers at will.

A lack of support from business leaders and a furious backlash fromVince Cable, who has warned ministers that the proposal would leave a “dead hand of fear” hanging over employees, is expected to persuade No 10 that the proposal should be quietly dropped later this summer.

The prime minister was giving no public indication of a climbdown last night when he said he was still interested in the Beecroft proposal that employers should be allowed to sack unproductive staff without explanation, known as no fault dismissal.

“On the issue of no fault dismissal and other proposals like that, I am interested in anything that makes it easier for one person to say to another person: ‘Come and work for me,’ because we need to make our economies flexible,” the prime minister said in Chicago. “We need to make our labour markets work as flexibly as possible and we will obviously need to examine each proposal on its merits.”

Government sources indicated last night that Cameron is expected to accept that the proposal should be quietly dropped when Cable eventually finalises his plans. A six month “call for evidence” on a diluted version of the original Beecroft proposal – that the “no fault dismissal” should apply to micro companies employing fewer than ten staff – is due to end on 8 June. It is understood that the evidence so far shows little support among businesses for the proposal.

One source close to Cable said of the proposal: “The last thing employees want is the dead hand of fear hanging over them about losing their jobs.”

The coalition partners appeared to be at loggerheads yesterday when the Sunday Telegraph reported on its front page that the prime minister was poised to endorse the controversial report by the Tory donor Adrian Beecroft. The report was commissioned by Steve Hilton, Cameron’s long serving policy guru, who is leaving on a year long sabbatical to the US amid frustration that the prime minister is failing to be sufficiently radical in trimming the state.

The Sunday Telegraph made little mention of the no fault dismissal plan, the central recommendation in the Beecroft report. The newspaper instead focused on areas which have either already been introduced by the government or are not controversial.

One Lib Dem source said the Sunday Telegraph report was designed to show No 10 was standing firm when in fact it is backing down. “This is all part of Steve Hilton’s epic leaving bash,” one source said.

Cable will this week publish the Beecroft report after a series of requests, from the Guardian and the shadow business secretary Chuka Umunna among others, for it to be released under Freedom of Information rules. It is understood that Cable believes that the publication of the report will come as a surprise to many because the 24-page report is seen as thin.

One senior minister told the Guardian last year: “It is a flimsy piece of work. If an official sent me a piece of work like that I would send it back.”

Cable showed his irritation with the report when he told friends that he was surprised that No 10 has shown such interest in a report from a donor. Cameron faced embarrassment after the recent resignation of the Tory treasurer Peter Cruddas when it emerged that he encouraged donors to put their thoughts down on paper.

A source close to Cable said: “It is surprising that No 10 backs a report compiled by one of the Tory party’s biggest donors. But it has been noticeable that since last Wednesday, No 10 has been moving towards more evidence-based policy. The reasons for that remain to be determined, but we can assume that as a result reports like this will be a less prominent in the future.”


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