In recent years, Slovakia has earned the reputation of an automobile powerhouse. Looking at the number of cars produced per capita, it has a clear edge over other countries. However, Slovakia is more than just a country of car plants. A new economic sector of shared service centers has sprung up over the last 20 years, offering good jobs with good salaries and benefits, and which also attracts foreign employees.
Shared service centers are companies that provide corporate services to their parent company. Large companies can thereby benefit from economies of scale and optimize their support service processes. Usually, they provide services to more than one country within a region. In Slovakia, the shared service centers most frequently provide support services in accounting and finance, as well as IT services. In the beginning, they used to provide simple services, but nowadays, they can also deliver transaction services with higher added value. Since they provide support services to multiple countries, the language of communication is usually English and, in a particular team, often also the native language of the country for which the services are provided.
In 2017 more than 35,000 people were employed in Slovak shared service centers, making it a sector larger than the financial sector or accommodation and catering services. The Ministry of Economics of the Slovak Republic aims to reach 60,000 employees in the sector by 2020, which would place the sector in a similar sized category as the automotive industry, which employs around 75,000 people. Although the number of employees in the industry has increased by double digits in previous years, the growth slowed down slightly in 2017. The reason for the slowdown may be the decreasing availability of available labor which is also hindering other parts of the economy. The decline in the growth of jobs is caused both by slower growth of the already existing and running centers, whose capacity for growth is limited without taking on new activities, and a lower influx of new companies opening their centers in Slovakia.
The Slovak economy is positively affected not only by the number of jobs but also by their job descriptions and remuneration. More than 70 percent of shared service center employees are university graduates of finance, accounting, IT, HR, process management, and other fields. In 2017, the average salary in the sector was 1,730 euros, which was almost double the country’s average (954 euros in 2017). The staff turnover in the best centers is below 10 percent.
Interesting job descriptions, remuneration, and an international environment are also attractive for foreigners. More than 12 percent of shared service center employees come from abroad, while the share of foreigners in the overall economy at the end of 2018 was less than 3 percent. Shared service centers are thus an element that increases the cosmopolitan character of Slovakia.
However, shared service centers are not only a phenomenon in Bratislava. Although most of them and indeed the largest ones can be found in the two largest cities, Bratislava and Košice, in total there are more than 60 companies in the sector that are located over more than 20 Slovak towns.
Since the Slovak economic growth has mainly been built on the back of the automobile industry over the last two decades, many politicians and analysts are pondering what will come next. Shared service centers may form the economic pillar creating good jobs with high productivity in the future.
Tibor Lörincz is an economic analyst at Tatra banka.