The Malta Independent 30 November 2022, Wednesday
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Government taking employees from private sector is a ‘significant problem’ – Chamber of SMEs CEO

Kevin Schembri Orland Sunday, 25 September 2022, 08:30 Last update: about 3 months ago

The government taking employees away from the private sector is a ‘significant problem’, the CEO of the Malta Chamber of SMEs Abigail Agius Mamo told The Malta Independent on Sunday.

The Chamber of SMEs issued a document with its proposals for the upcoming a few days ago, which included the results of a survey the Chamber carried out.

Agius Mamo sat down with this newsroom for an interview, analysing both the survey as well as the chamber's proposals.

The survey found that over 40% of businesses experienced wage increases of up to 15% over the past 12 months. Agius Mamo explained that the Chamber of SMEs invited businesses to highlight the three most problematic challenges that they face. "There are a number of challenges we know about, such as inflation, international shipping costs, major issues that we can't do much about and so these are of concern for businesses. But it was impressive that out of all the ones they could have chosen, the absolute majority chose issues with human resources, and they also highlighted increases in wage costs."

The human resources issue, she said, has resulted in the poaching of employees between businesses. "This led to wage increases that are not necessarily linked to productivity."

In terms of how sustainable the situation is, she said: "We need to look at sustainability not just in terms of paying wages, in terms of productivity, but also in terms of how we are managing Malta's human resources at a national level."

Even though the country has been dependent on foreign workers for years, "we still don't have an efficient way of recruiting foreign nationals," she said. For a number of reasons, mainly due to high rental costs, many a time businesses only manage to attract foreign workers from outside the EU, she added.

The system, she said, is "too complicated, and that is where the lack of sustainability begins." She said that the country doesn't have a route that will make it easy to employ foreign workers and remove the pressure that leads to wage inflation.

The survey found that the main reason businesses lost employees in the past 12 months was due to better private sector offers. However, the second highest reason was losing employees to the government. Keeping in mind that Malta held a general election in March of this year, she was asked how big a problem the government taking employees from the private sector is.

"It has become a significant problem,” she said. “We received many reports from our members saying we need to do something about this as it is very frustrating. It's already very difficult for businesses to cope with the lack of human resources, having to try and retain in all the ways possible. But competing with the government is a totally different ball game. Businesses cannot offer the same conditions that government offers. And now, post-election, we are hearing about the issues that the big recruitment before and during the election caused - sustainability of finances, too many resources in certain entities and certain government companies."

Businesses are saying that there aren’t enough human resources in Malta for everyone, she said. "The economy moves much faster than we can produce workers. So we need to tap outside our shores for workers. But then that's already very difficult to cope with. Doesn't the government understand that we are already going through a very hard time?” She said that over 50% of businesses are not just a little understaffed, but are “heavily understaffed."

Not enough is being done to help businesses tap into foreign human resources to bring them to Malta, she said.  "Now we also have to compete with the government?" she asked, saying that the government also takes employees who would have been working with private businesses for even ten years or more. "It's insulting, it's frustrating, and it’s difficult to deal with."

As for the government's attitude towards this issue, she said that the government "up to a certain extent," understands this problem. "We did not get a clear admission from the government that this problem has manifested itself. But we know, from our members and from what happened before the election, and we were not the only business organisation speaking about this issue."

The Chamber is seeking a commitment to enter into a framework that will be agreed upon with the social partners, as to how government recruitment takes place. "Our aim is not to limit government from recruiting necessary resources. If resources are a bit scarce, they are scarce for everyone. But looking at things from a sustainability of government finances point of view, we believe there needs to be a bit of a rethink, and safeguards for this not to happen again."

One proposal being pushed forward by the Chamber of SMEs is for a secondment plan.

She was asked who would pay the wages of the seconded employees, and why, rather than secondment, it isn't pressing for the government to conduct an analysis of current public sector jobs and identify where fewer workers are needed.

“This emerges from the experience of dealing with a number of schemes, working with the government on a number of issues. We have seen that, for instance, the in-work benefit scheme worked quite well. These were unemployed persons who were out of employment for quite a long time, and it was very difficult to wean them off benefits and bring them into employment. But doing it gradually, and incentivizing them in doing so, helped in the medium to long term. So our proposal for a secondment plan is for the government to continue financing wages (temporarily). This will help with inflation, it will help with difficulties businesses are experiencing at the moment, and it will offset the COLA a bit, as well as other aspects.”

She clarified that the idea is for the government to finance the wages for the first couple of years of the secondments to the private sector, “which in the medium to long term, pays.” It would be like a weaning-off programme, she said.

Agius Mamo said that through this secondment plan, coupled with a better understanding of how the government can operate while being leaner, it would be “much less costly and damaging for the government to carry these resources for a limited time-frame to help in the transition, than to continue carrying them indefinitely."

“People can work till pensionable age and possibly even beyond, and that is the kind of investment the government is currently looking at. So when comparing that, to covering the wage costs for a couple of years until one would find themselves comfortable in the private sector, it's a win-win situation.”

Asked about the fairness of placing the burden of wages of people who would be working in the private sector on the public, even if only for a few years, she said that this is similar to the discussions surrounding Air Malta. "Even though we would want to see clear-cut lines in terms of how fairness operates and how good governance operates, unfortunately you have to take a management decision, where you understand and appreciate that some mistakes might have been made, and how to damage control." She admitted that this might not be the most ideal outcome, “but in reality, we know that it is not an option to tell government to let all these people go. It will not happen. We know that is the reality."

"With those realities, we try to find the best solution." She said that this could be another scheme by which the government would support the private sector.

She warned that businesses operating with lower capacities means that they would need to close certain outlets, or that they wouldn't be able to provide the standard service they are used to providing.

National strategy for employment of third country nationals

The Chamber is pushing for a shorter route for employment of Third Country Nationals. 

She said that this ties into the sustainability of managing human resources in Malta. "I must acknowledge that a lot of improvements have been made. We have worked with the various entities that deal with the employment of third country nationals, and they were of great help. But we believe that a higher level, national strategy is needed."

She highlighted that it doesn't make sense that businesses that need to hire employees from outside Malta have to go through a whole bureaucratic system that has ended up overburdening the system itself.

If a business requires an employee, she said, the business does not have an agency to pass on that they need one worker with x skills and to offer information about the remuneration package, with the person then being matched. Instead, businesses need to source the workers themselves, "and we know that the majority of businesses in Malta are micro-enterprises with less than 10 employees."

"Imagine going to source a worker from a foreign country with the limited resources you have, with the limited knowledge of how to assess whether this worker would fit within your company and this worker's intentions of coming to work in Malta, paying quite a bit of money for the application and VISA, only then to have the worker refused (by the authorities)."

It involves a lot of running around in circles, she said. "A lot of expenses, a lot of waiting"

"Waiting for six months is not a justifiable wait to employ someone. This all needs to be looked into."

She said that like Malta, all countries have a national employment agency. "We can work smarter. Other countries have an oversupply of workers, and they could be connected to Malta. But it doesn't mean that I, a small SME with four employees, needs to go and source this person." 

Through connections and diplomatic ties, she said "we can make workers available with the due diligence already conducted, coming to Malta within a few weeks. A person cannot wait for six months for a job to come to Malta. We are losing so many employees to other EU countries because we are operating inefficiently."

Tenders and unfair competition

The chamber also highlighted certain issues with tenders, mentioning unfair competition in certain instances. She was asked to provide some examples of such unfair competition or preferential treatment.

"Our members mainly tell us about two scenarios. Sometimes it’s a sham, where a company would have already been selected, the products would have already been selected. They know this because you cannot come up with a decent proposal within a very short timeframe - and they sometimes give very short timeframes - and also due to specifications which perhaps only a specific company would manage to reach."

"In that way, they know that something is off, that it was not a real open call, not a real competition for them to bid for."

"But there is a second level of unfairness," she said, where for businesses to participate they would need to put up a number of financial commitments even before knowing that they will be selected. “This is completely unnecessary," she said.

If a business notices an injustice in the system, she said, where something was done incorrectly, in order to submit a complaint with the relevant body they would need to pay thousands, she said, but added that this isn’t always the case. “These are a lot of barriers which are supporting the unfairness of the system."

Asked why we don't hear too often about businesses complaining or calling for an investigation into this, she believes that businesses feel a little helpless. "They don't feel they have a viable route. We see quite regularly - where tenders are questioned, tenders are investigated, tenders are repealed because they were not conducted in a proper way - many times following an external investigation. We believe that if the route for redress was easily accessible, this would happen more often, and this would not give comfort to whoever is carrying out things in an improper manner.”

The Chamber is calling for the creation of a public procurement ombudsman,

“It would be an independent entity that would be there specifically to assist businesses that feel the process wasn't fair."

She said that direct orders are also an issue that businesses have raised with the Chamber on a number of occasions. "The necessity of direct orders is not always justified. But there is a lack of transparency as to how direct orders are given, what justifies a direct order… and there are some grey areas and loopholes that are being used."

She said that the Chamber wants the proposed Ombudsman to also be able to deal with direct orders and see if they were justified.

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