1. Canada

The past year saw a spectacular rise in the loonie in relation to the American dollar. In fact, the Canadian dollar climbed to its highest value in the past 12 years, topping 80 cents US. The Canadian economy was also impacted by the shocks of the mad cow and SARS crises in 2004. Yet, in spite of all that, our economic performance continued to be strong, reflecting a real growth of some 3.2% in the third quarter of 2004.

On this basis, the Canadian economy should do well in 2005. However, there’s still a cloud on the horizon - will the exchange rate exceed the limits of what the economy can bear? Everything indicates that the Bank of Canada will keep a close watch on the situation in 2005 and economists agree that the loonie should stabilize, enabling the Canadian economy to grow by roughly 3.2%. In addition, the unemployment rate is generally expected to improve.


Macroeconomic data

Canadian economic performance looks promising in 2005. Following a 3.9% increase in the second quarter of 2004, Canada’s real GDP grew by 3.2% in the last quarter (see chart 1). Economic growth is expected to increase by some 3.2% in 2005 and Canada will be the only G-7 country to enjoy budget surpluses this year.


Source: Department of Finance Canada


Growing demand for Canadian products continued to contribute to job creation throughout 2004. Nearly 195,000 jobs were created in the first 11 months of the year, propelling employment growth to 1.3% in the third quarter. These new jobs are almost all full-time jobs, substantially replacing part-time employment. The unemployment rate was pegged at 7.3% in November 2004, after climbing to 7.1% in the early fall, a record performance for the past three years.

In short, 2004 ended with good employment growth, even though the labour productivity of Canadian organizations appears to have dropped. Hourly productivity fell by 4.6% in the third quarter, in part because strong growth in hours worked surpassed the gain in output. It should also be noted that labour costs per unit of output rose by 1.2% in relation to 2003.

Despite this employment performance in 2004, the booming Canadian dollar could hold back growth in 2005. Forecasts for 2005 indicate an employment growth of 1.2% and an unemployment rate that should stabilize around 7.2 %. It appears that manufacturing output will contribute to this employment slowdown. The expected decline in exports – due to the strong Canadian dollar– together with the poor performance of the American budget should force the manufacturing sector to step up its restructuring efforts, which would in turn jeopardize job creation in this sector.

As for inflation, the consumer price index rose to 2.3% in October (compared to 1.8% in September) owing to rising food and energy prices. The Bank of Canada will keep a close eye on the inflation rate in 2005 to ensure it remains below 2%.

In short, it seems that, following its recovery in 2004, the Canadian economy should post an equally enviable performance in 2005. Job creation, however, will be a qualified success because of increased restructuring in the manufacturing sector. Despite this glitch, Canada should continue to be the envy of the other G-7 members thanks to its budget surpluses and stable economy.


The HR profession

Globalization and the fierce competition that it engenders have led to a number of dramatic changes in the Canadian human resources landscape.

One of these is the growth of atypical employment, particularly temporary jobs, which certainly constitutes a serious challenge for Canadian human resources management professionals. A recent study by Statistics Canada indicates that temporary employment is increasing in Canada and accounted for 9% of the jobs in the private sector in 2004, compared to 5% in 1989. The study also reveals that 21% of newly hired employees in 2004 were employed in temporary jobs (compared to only 11% in 1989).

This trend has given rise to new debates, both on the legal front and within organizations themselves, about the rights of these employees and the obligations of their employers. In addition, the growing prevalence of these types of jobs, although satisfying the flexibility employers are looking for, has some unforeseeable consequences and raises major challenges as concerns organizational climate and work team productivity.

Staffing and recruitment will also be issues to be closely monitored in the coming year. More and more companies are tending to concentrate efforts on their current employees rather than outsource. This trend is growing and recruitment needs are continuing to rise because of the large numbers of employees reaching retirement age and increased employee mobility. To meet this challenge, many organizations are adopting applicant management systems, which allows them to build up banks of applicants and more effectively plan their recruitment management. Efficient electronic selection tools to support recruitment professionals in their work are also growing in popularity.

All these factors will contribute to professionalizing the recruitment function since employers are realizing its strategic importance in helping them avoid costly errors.

Another important element for Canadian human resources professionals to watch is total compensation, which will impact on their work in a number of ways over the coming year. First, the massive entry of young people into the workforce and the retirement of current employees will exert upward pressure on salaries. What’s more, employment offers for managers or unskilled workers are more and more based on factors tied to the quality of life since that’s what employees are looking for. Many businesses are taking steps to ensure a healthy balance between their employees’ professional and personal lives and to manage the aging of their workforce. Moreover, eligibility for short-term profit-sharing schemes is increasingly an option in both the private and the public sectors.

Lastly, everything indicates that during the next two years, human resources management department will focus on performance management to ensure the best possible match between performance and recognition within organizations.

Canadian Council of HR Associations

In recent months, several initiatives have been approved by the CCHRA as part of its 2004-2007 strategic plans. First and foremost, the council unanimously approved a resolution requiring a bachelor’s degree as a prerequisite for obtaining the CHRP designation. This will take effect across Canada in 2011, marking a major milestone by reinforcing the standard features of our designation, not only by means of the examination process, but also by implementing a common educational criterion.

Second, last May, the first national examinations leading to the CHRP certification were held. Two hundred and fourteen people received their diplomas and pins, as well as the right to use the CHRP designation. This event marked the culmination of a long process through which we defined and measured national standards specific to our field.

Also under its strategic plan, the Canadian Council launched an initiative to prepare a marketing campaign to promote the CHRP designation across Canada and ensure better visibility for the council.

Third, two major agreements stemming from the 2004-2007 strategic plan were recently approved. They will increase CCHRA’s visibility as a key player on the national scene. The first agreement was signed with Ceridian Canada Ltd. For the sponsorship of a national forum to identify priority HR issues and recommends intervention strategies for the profession. The first event will take place next spring. The second agreement will enable each CCHRA member association to gain priority access to the results of Hewitt’s Best Employers in Canada’s annual survey and as such, the survey findings on best HR practices across the country. As part of its partnership, CCRHA – through its member associations – will advertise the contest to HR practitioners across the country.

All of the above initiatives indicate that the coming year will be an active and promising one for the profession and the Canadian Council of Human Resources Associations.


CHRP designation update:
Over the past year, we have been working to continuously improve the systems and programs that support national standards of assessment. Here are the highlights of recent accomplishments.


National code of ethics:
A national code of ethics was developed and adopted by all member associations where legislation permits. This code applies to writers and CHRPs, as well as those in process of obtaining the designation. A national task force is currently drafting a discipline process as the enforcement component to the code of ethics.


Certification exams:
The year 2004 saw steady increases in the numbers of exam writers, as well as improvements in exam content and administration. Nine hundred and ten candidates wrote the National Knowledge Exam (NKE) exam, the first exam required for CHRP certification; while 572 candidates wrote the second required exam, the Professional Practice Assessment (PPA). Further increases are expected in 2005 as the Ontario provincial exam is phased out and HR professionals across the country become more aware of the designation.

The Independent Board of Examiners who set the exams and review the results, continue to update and refine the question bank. Pass rates have improved for the NKE, and ranged from 79% on the May 2004 exam to 84 % on the October exam. Pass rates for the PPA ranged from 88% on the May 2004 exam to 79% on the October exam. The PPA is geared to HR professionals with approximately five years of experience. The high pass rate on the first exam may be related to the large number of exam writers at this sitting that had more than five years of experience.

The PPA has a unique format. It is comprised of 40 critical incidents covering the challenges likely to be encountered by intermediate level HR professionals. The incidents themselves are based on actual experiences and the four possible answers to each incident are also prepared by groups of HR professionals and then refined by the Independent Board of Examiners.


Review of capabilities:
The exams test HR knowledge as outlined in our Required Professionals Capabilities (RPCs). A review of RPCs start in 2005 to ensure we maintain currency with new developments in HR.

Recertification:
A National Recertification committee was formed recently to ensure consistency across Canada in the application and interpretation of recertification guidelines.

Fellow Certified Human Resources Professional – FCHRP
A process was implemented whereby those CHRPs who have made outstanding contributions to their profession would be recognized nationally with the honorary title, FCHRP. Awards will be made only where warranted, and we do not expect to bestow this award every year.


2. United States

As of December 2004, the Bureau of Labor Statistics of the United States Department of Labor reported the unemployment rate remains unchanged at 5.4% with 8 million people unemployed. This number has remained steady since July 2004, and is slightly below unemployment figures reported for the first half of 2004. Non-farm payroll employment increased by 157,000.

The employer costs for employee compensation averaged $25.36 per hour worked, as reported in September 2004. Wages and salaries, which averaged $17.96, accounted for 70% of these costs, while benefits, which averaged $7.40, accounted for the remaining 29.2%. The Employer Costs for Employee Compensation information, which is based on the National Compensation Survey, measures employer costs for wages, salaries, and employee benefits for non-farm private and State and local government workers.

Costs for legally required benefits, including Social Security, Medicare, unemployment insurance, and workers' compensation, averaged $2.06 per hour (8.1% of total compensation), representing the largest non-wage employer cost. Employer costs for life, health, and disability insurance benefits averaged $1.96 (7.7%); paid leave benefits (vacations, holidays, sick leave, and other leave) averaged $1.68 (6.6%); and retirement and savings benefits averaged $1.05 (4.1%) per hour worked.


Current US HR trends

The rising cost of healthcare continues to be an issue of concern for HR professionals in the U.S. There are some states, including California, that are considering legislation that would place responsibility for health insurance on the individual rather than via employers. This would be accomplished for example by making it mandatory for individuals to have health insurance, much like car insurance is required in order to register a car in the U.S... This issue is being tracked by our state affairs team and information can be found online here:
http://www.shrm.org/government/states/pendingleg/BENEFITS2004.pdf

To further examine creative solutions to healthcare cost containment, SHRM did quick case studies of several of the Best Places to Work winners from 2004. Many of these award winners provide their employees 100% healthcare coverage, an expensive benefit – but managed to keep rising costs well below the average rise in costs.

Example 1
For one organization, premiums increased approx 28% from 2001 to 2002; approx 5% from 2002 to 2003 and then 0% (actually a decrease in total cost, at the $1,000 deductible level) from 2003 to 2004. What contributed to this cost control?

In January 2004, per long-range plans set in place at the end of 2002, the organization implemented a "consumer directed" group health plan. This required a great deal of homework—including a site visit to the selected carrier - to secure a fully insured plan, which met the company’s objectives. Included among those objectives was the expectation that employees would spend time and energy participating in their health care decisions. In this case, that meant using Internet tools to look up medical codes/procedures and their insurance related 'value' (how much the insurance carrier would pay for a given procedure). It was the employee's responsibility to either use a carrier whose fee schedule was uploaded on the carrier's web site, or to take the payment information to another provider whom they selected and ask whether the provider would accept that payment; if not, the employee knew (s)he'd be responsible for the 'balance' of the bill.

The balancing benefit to employees was that the plan did not utilize "networks," so they were not faced with dual deductibles and out-of-pocket expenses (one in network and one out-of-network) and there were no misunderstood exclusions due to "network" restrictions. The organization maintained close communication throughout the year with the new carrier/vendor and held several employee information/education meetings to offer employees the help they needed to make this plan design work.

Example 2
An insurance company employing just over 700 employees pays 80% of the employees’ health care. Over the last three to four years they’ve been able to limit health care costs to between 3% and 4%. Our HR contact there attributes the company’s savings to three primary factors: 1. ongoing education program to help employees become savvier in their health care purchases. 2. They went with a new claims payer that better uses technology, which helps the organization more easily communicate to employees so that they can be better-educated health care purchasers 3. The company has employees in 13 states, and has negotiated health care networks in each state. They encourage employees to use these health care networks as networks save the company, and the employees, significant dollars.

The organization complemented this effort with free stress-management classes, smoking cessation, nutrition classes, etc. through their Employee Assistance Program. The company also works with a third-party vendor to conduct health-risk appraisals each year for employees. If an employee is found to be high risk for certain long-term problems, like diabetes or hyper-tension, the third-party vendor will work with the employee to help them try to take the necessary steps to head off any serious concerns. This information remains private, so that the company is not aware which employees are considered high risk.

Example 3
A small company with 170 employees that pays 100% of health care costs for employees experienced a 17% jump in health care costs during 2001. The company determined it needed to make changes. They compared other plans and options, but found that because they were a small company, simply changing health care vendors wouldn’t provide substantial savings. They determined that any changes, and any savings, had to come from within the company.

First, the company did a lot of communicating to and education of employees about health care, including what to ask doctors, pharmacists, etc. Second, the company created a basic health care plan for everyone. If an employee chose a plan that was less than the basic plan (higher deductible, etc.), the company would pay the employee the difference. In addition, if an employee completely opted out of the program to go under a spouse’s plan, the company paid the employee $150/month, thereby creating an incentive for the employee, and saving money for the company. The company did require that any employee taking the $150/month incentive prove that in fact they had health care elsewhere.

The company claims that with employees more educated in the ways of health care, they were able to limit their health care costs to 6% in 2002 and 12% in 2003.

Further information about these examples can be obtained through the SHRM media affairs team.


Society for Human Resource Management (SHRM) update

In conjunction with Rutgers University, SHRM recently developed a monthly Leading Indicator of National Employment (LINE) to be released the fourth Tuesday of each month. LINE reports on five employment measures, three of which are new and unique to LINE, and two of which add to existing indicators.

Recruiting Difficulty—reports the difficulty for organizations to attract highly qualified applicants to fill key positions compared with the previous month. Both the size and the skill level of the applicant pool affect how difficult it is to find highly qualified applicants. Therefore, this measure of recruiting difficulty should be more sensitive to changing labor market conditions than the unemployment rate which measures only the number of job seekers.

New Hire Compensation—reports on new hire compensation. Changes in labor market conditions are reflected in the compensation levels needed to recruit new hires.

Employment Expectations—reports whether organizations expect their employment headcount to change in the upcoming month. Since HR professionals providing these reports are the individuals who must implement any employment changes, their expectations are a useful indicator of near-term employment change.

Total Employment—measures the job growth or contraction of exempt and nonexempt positions each month.

Total Vacancies—measures total job vacancies. Changes in the number of job vacancies can be one of the earliest indicators of a shift in the balance between labor supply and labor demand.
An index value is provided for each of the measures, and then an overall LINE index derived and reported. January’s index indicate that employment continues to grow, but at a slower pace. An index value above 50 indicates employment is growing, while an index below 50 shows that employment is contracting. The reported LINE for January is 57.8; November had been 60.0, December 58.7.


3. Mexico


Macroeconomic Trends
The Mexican peso gained ground versus the US dollar in comparison to 2003, but it is expected to behave erratically while the economic, political and social instability in the country persists.

The economy expanded at a 3.9% during 2004


Political
The PRI (the party that was in power for over 70 years and was ousted by actual President Fox) is regaining ground by winning several State and Municipal elections. It looks now a strong contender for the Presidency for the 2006-2012 period with a legitimized character.


Social
Security in Mexico City and in most of the country is at its lowest. This scares off investments.
Mexico is losing its competitiveness in the International Markets mainly against China and also versus Chile and Brasil.

Unemployment
Although the economy is growing (at a lower pace than was originally planned), it still does not generate enough jobs, so unemployment keeps rising.

HR issues
As expected, the Reform of the Labor Law did not come through causing a rift between the Executive and Legislative branches, that is being presented to the Judiciary branch for its resolution. Nevertheless a Reform is not expected for the next 12 months.

Contract negotiations which have been in the 4-5% range will be subjected to upward pressures in the coming months. Nevertheless, unions are more conscious of companies’ economic situations and are negotiating more on compensation through productivity increases.


Professional association - AMEDIRH

o Slight increase of new membership since May 2004 maintained through the second part of 2004.

o The newly organized 75 top Human Resources Executives group, now with 82 members, kept through all 2004, its professional and social activities, rapidly becoming one of the most prestigious groups in the National Human Resources Community.

o During 2004, AMEDIRH organized 31 different training programs with 786 participants. Our Annual Forum and Exposition had over 900 participants.

o With a new Editorial Committee that includes renowned members of the Human Resources Community, formed in January ´04 to assure format and content, the Proyeccion Humana Magazine, finished 2004 with a complete new image and content.

o A new President for AMEDIRH for the 2004-2006 period was elected. Mr. Miguel Angel Sanchez is the new President starting January 1°, 2005. He is presently VP Human Resources of Aeromexico, the largest airline in Mexico.

o Certification Program, ongoing but at a slower pace, seeking an official validation institution to support the effort and the Certification itself.