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Digital Age and how it will challenge HR and companies

published April 2017

When we look at the changes that the economies we are entering and already are finding ourselves in, we can clearly see that businesses and HR will be challenged in many regards. From a sharing economy, to IoT (Internet of Things), automation, AI (artificial intelligence) all the way to quantum technology (where likely the future of technology will be) and of course the latest being augmented reality (AR). Not to forget, that all of this will continuously adjust in the years to come. We will find that the education system and the job market will not be able to deliver at that pace and on a continual transformation basis.

This means HR will have to look at who can be retrained and governments will need to figure out what will happen with the displaced workers. Some statistics talk about 5 million jobs that will be displaced by 2020 and only 2 million which will be created. The future of work in a digital economy will look very different. Key positions and highly sought after will be machine learning experts, coders and data scientist. HR can ensure that there is a stronger and more continuous connection between education, training and development as well as smart hiring. Further to that HR will need to hire

employees with basic digital literacy while enabling and ensuring a mindset shift, adaptability, as well as new leadership and problem solving skills in the existing workforce.
We find ourselves in the age of automation and disruption with technology being at the core of it. It is no longer Silicon Valley which stands at the center of startup companies; you have new “Silicon Valleys” starting and already existing in London, Berlin and Amsterdam, and more to come. Here you have a digital literate workforce, however, they might not necessarily be willing to join “traditional” companies or don’t show the needed skills that companies may require. Education is going to be a vital development, the online/mobile phone learning experience is being adjusted and upgraded on a continuous basis to ensure a more interactive and personal experience. Interestingly enough even here, the preferred practice “person” is not necessarily another person but rather AI as the “practice partner” (example a chatbot for languages). The United Kingdom has put coding as mandatory on the national curriculum for example. In the United States, Udacity University – a University “built by Silicon Valley” is offering nanodegree programs.
One key area I want to highlight today is where we will see key changes, namely the labor regulations, especially in complex countries.

I had the pleasure to interview Dr. Frank Walk from Emplawyers on this complex topic.
Dr. Frank Walk is an expert lawyer for labor law and deals intensively with the effects of digitalization in the workplace and what the legal implications will be for organizations. Dr. Walk is a partner at Emplawyers before he worked at Bird & Bird from 2011 to 2014 and Taylor Wessing from 2002 to 2011. The lawyers from Emplawyers' also provide trainings for companies on current labor law issues.

Dr. Frank Walk

Which topics in labor regulations in Germany are changing the fastest currently?
I see the problem with regards to the fact that the labor regulations do not keep up with the pace with the actual changes in the workplace. For example the topic of work time: In Germany, the law states a strict maximum of 10 working hours per day with an uninterrupted rest period of 11 hours. This means that if an employee checks his e-mails for 5 minutes in the evening before going to bed at 11 o'clock, he can only start working at 10:06 the next morning. This is not consistent with the modern workplace reality.
A different example would be the cross-border work: earlier the exception, now the rule in many industries. Here the tax and social insurance legislation is added to the complex questions of labor law. In order to comply with all applicable regulation, a company will need expert teams and numerous external service providers otherwise it will take considerable risks. The regulations are far behind the practical requirements.
I could give you many more examples. Ultimately, however, they are almost all connected with the digitalization of the workplace, which allows working from anywhere and at any time. Legislators, collective bargaining parties and business partners must face this reality.

Where do you feel we will see the most complexity in labor regulations in the future?
New forms of work and collaboration (for example, crowd working, on-demand, mobile work, etc.) are increasingly replacing the classical normal employment relationships. This makes the already complex topic of the differentiation of the employee from the freelancer (= self-employed) even more difficult, since the usual criteria for employees like taking orders regarding the place, time and manner of the work or the integration into the organization of the employer are becoming less important for employees. The demarcation is already almost impossible to predict reliably, but at the same time involves considerable financial implications for both parties.
Another complex issue is data protection. More and more people are doing their work with digital devices and applications, generating a lot of personal data that can be collected, stored and analyzed. On the one hand, this data can be used to optimize workflows and processes; on the other hand, however, it also enables to monitor employees in a manner which is not compatible with personal protection. These interests must always be re-evaluated. It becomes really complex if different legal standards and also cultural differences meet, if for example the US parent company would like to receive the employee data of the German subsidiary.

What role will the works council and potentially also their counter-parts in Europe play going forward with the digital age?
For Germany, I see the works council in a central role, especially in matters of data protection. The aforementioned conflict of interests between company purposes in data processing and employee monitoring is to be negotiated in German companies which have works council.
A new task for the works council in the field of digitalization is to bring the training and qualification of the employees on the agenda of the company which is an area of the works council that has been neglected so far from my point of view, although the respective rights are provided for by law.

Do you have an example, where even you in your field feel that the digital age will impact or change how you work?
On the one hand, there are already a number of internet-based legal business models which - at least for certain legal areas – add real value for users, e.g. claiming of compensation for flight delays or the defense of fines in the event of traffic offenses. On the other hand, intermediary platforms are offered mainly for personal legal matters. However, I personally see the essential changes in the internal law firm’s organization, for example, document management, contract creation and collaboration with colleagues and also with clients. Here, digitalization still offers considerable potential for increasing efficiency.

As we will recognize, the complexity is given and the more prepared organizations are, the easier the transition phase will be.