Oleksandr Kalenkov: The reservation system needs urgent improvement

If no changes are made to the reservation mechanism, the situation for steel industry will worsen and negatively affect the entire economy

Due to fraud with the reservation mechanism, the Cabinet of Ministers decided to audit decisions on granting the status of critical enterprises by November 15, which stopped the reservation procedure for all enterprises. This has exacerbated the negative effect that the current reservation system has on business. In particular, due to labor shortages, iron and steel companies are already taking longer to repair and launch equipment and producing less than they could. If no qualitative changes are made to the reservation mechanism, the situation for the iron and steel industry will only worsen and, as a result, will have a negative impact on the country’s economy.

Peculiarities of reservation at steel industry

The situation with the reservation of iron and steel companies has its own peculiarities compared to other sectors of the economy:

Production capabilities of large enterprises are already limited.

The production capabilities of large enterprises are not directly proportional to the amount of staff mobilization. If, for example, we mobilize 10% of our staff, it does not mean that we have to reduce production by the same 10%. Our production processes require 100% of our staff. Yes, there is a certain critical minimum, but the absence of even one employee affects the entire production process. Currently, 15-20% of our employees are mobilized at our enterprises. Therefore, the business not only faces the risk of a 15-20% decline in production, but may also shut down completely due to a shortage of employees.

Iron and steel companies are in unequal competition with the shadow economy because they have transparent personnel records, “white” salaries and pay taxes.

In order to implement the mobilization plan, territorial center for acquisition employees need to look for people in the middle of nowhere or catch those who do not have official jobs or receive a salary in an “envelope” (or do not work at all) one by one. It’s much easier to come to the factory gate and hand out hundreds or even thousands of summonses at a time.

Difficulties in filling vacancies.

The transparency of HR records in companies scares people away. We want to, but we don’t have time to reserve people who have just been hired. The process of processing documents for reservation can take several months. In other words, while the reservation documents are being prepared, these people can be mobilized. In addition, companies often mobilize qualified personnel whose replacement takes several years to prepare.

Steel enterprises have a legal right to a higher reservation quota.

Currently, enterprises in the industry have the right to reserve 50% of those liable for military service. However, all our plants are critical to the economy, many of them are city-forming and operate in frontline regions, supporting local communities and the Armed Forces. Given this role of steel sector, we believe that the 50% quota is not enough. In addition, many of our companies supply a huge amount of products for the defense industry and the construction of fortifications, which means that they can be effectively equated to defense companies that have 100% reservation.

Many companies in the industry operate in frontline regions, where security risks and staffing problems are very high.

Many of the plants are located in areas close to the contact line. People are leaving these regions in droves, which makes it difficult for companies to fill the staff shortage.

Changes in the reservation mechanism

Like all “white” businesses, we are interested in putting things in order in the reservation industry, because any abuse does not affect “gray” companies, but the legal sector of the economy.

However, the decision to audit is being implemented incorrectly and has a negative impact on the economy. The first mistake is that not only has the issuance of the “critical” status to new companies been suspended, but also the extension of reservations for employees of companies that already have this status. In addition, our companies received this status through the Ministry of Economy, not through the RMA, where the main abuses were found. In theory, our companies should not have had any problems at all, but we did.

If no decisions are made soon, the negative impact will only grow. To improve the reservation procedure and increase the efficiency of iron and steel companies, we propose the following:

Audit of decisions on granting the status of critical enterprises – this area should be put in order.
A decision of the Cabinet of Ministers is needed so that the Ministry of Economy and other government agencies extend the criticality status to enterprises that have already received this status through the Ministry and approved lists for employee reservations.
Increase to 85% of the quota for personnel reservation for enterprises in the industry, including enterprises in the frontline areas (100 km from the front line).
Automatic reservation for 3 months for newly hired employees.