PwC: Hungary SSCs Battle Labor Shortage, High Turnover

Analysis

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The most significant challenges faced by shared services centers in Hungary relate to a labor shortage, a high rate of staff turnover, and growing employee expectations, according to a survey of the sector conducted by Big4 consultancy PwC.

The big takeaway from the survey, published in mid-October, is that the focus on staff satisfaction is probably crucial to overcoming the majority of challenges.

The survey highlights “how the pandemic has affected Hungary-based SSCs, with a focus on their digital and HR agenda,” the Budapest-based authors, Péter Selmeci and Flóra Bagyinka say.

“Our results show that the pandemic put the emphasis on employee expectations in order to decrease turnover and extend talent pools, thereby developing GBS [global business services],” they add in the introduction to “Shared Services in Hungary: Towards New Directions.”

It is well-known that SSCs play a significant role in the Hungarian economy, although the preferred term for the government (and much of the industry) now is BSCs, or business services centers, as it implies higher value-added jobs.

The authors say that, in 2020, the sector employed more than 64,000 people in Hungary in 131 companies. “Most Hungarian SSCs operate in the manufacturing industry, with business and financial industries also representing a large segment.”

Accounting and tax services are responsible for most tasks performed here, although HR, sales, and legal services are also relatively common, albeit at a lower share than for SSCs globally, PwC suggests. The highest percentage of outsourced services are in the HR and accounting fields, where Hungarian centers carry out around 60% of parent company activities. 

The report points out that the Hungarian journey from relatively low-skilled workbench SSCs to more complex BSCs, able to perform global services and take on end-to-end processes, is largely dependent on having sufficient numbers of skilled staff.

Talent Pools

“The so-called talent pools are the main reason behind the development of Global Business Services: over half of the CEOs interviewed in Hungary believed that lack of employee skills drives up costs, hampers quality, impacts their ability to innovate, and affects customer experience,” the authors say.

What is sometimes called the “battle for talents” has meant services centers increasingly have to develop their employer branding in an attempt to make themselves stand out. “In fact, employers need to spend more to acquire talented staff,” the survey finds.

Average recruitment time increases with seniority, with the shortest hiring process taking up to 7-8 weeks on average. The PwC survey suggests these figures are roughly in line with global trends, but recruitment in Hungary generally takes one or two weeks longer across almost all seniority levels.

If hiring is time-consuming, retaining staff can also be problematic. Often, the quickest way to get a promotion or a pay rise might be to join a rival SSC. To counter that, PwC says Hungarian centers are trying to make the most of their global business services (offering more interesting, international roles) and increase employee satisfaction.

“Over half of the respondents considered talent management and employee engagement a strategic goal for the upcoming years,” the survey authors say.

More than half of the companies involved in the survey experienced 5-20% staff turnover throughout the past three years. Looking at the averages, Hungarian SSCs faced a more significant turnover in 2020 than in 2016 (when PwC conducted the last such survey) and the global average in 2020.

Standardization and digitization processes are being deployed to reduce the human input needed and place the “focus on more exciting tasks for employees, possibly resulting in higher retention levels.” Although these trends were already indicative of the direction of travel, they have also been amplified by COVID.

The study is based on a survey conducted from November 2020 to January 2021, with more than 300 participating companies from all over the world. The full report on the Hungarian market can be found on the PwC Hungary website.

This article was first published in the Budapest Business Journal print issue of November 19, 2021.

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