Redundancy fears haunt labour market

A survey of 721 UK employers reveals that the UK economy should be braced for yet more redundancies in the year ahead, with older workers set to bear the brunt.

Companies that have already made or planned to make redundancies in the next quarter are more likely to be considering further job cuts in the next 12 months. The news comes on the back of grim unemployment statistics, which show that redundancy activity has increased. 

Almost one in five employers say that they are going to enforce the government’s retirement age policy that allows UK organisations to make workers over 65 redundant without having to provide a business reason for doing so. The report also shows that the average cost for making workers redundant now stands at more than £10,000.

John Philpott, CIPD chief economist said: “The onset of recession is already putting jobs at risk but many more are in the firing line as employers consider their next move in a fast deteriorating economic situation. Hopefully, the Bank of England will help improve business confidence by continuing to cut interest rates and signaling that further sharp rate cuts are on the cards, so as to prevent a nightmare scenario for jobs.”

Philpott went on to say that with the average cost of redundancy to employers now running at more than £10,000 pounds for each person losing their job, there is a financial incentive for organisations to hold on to staff where they can. “This is obviously easier said than done in such tough times, but the business performance of organisations will be strengthened if they have the right people and skills in place to prepare them for the upturn in the economy, whenever it comes.” 

Dave Conder, KPMG HR director said: “Redundancy doesn't have to be the only cost reduction option for businesses during difficult times. Closing down recruitment avenues, deploying flexible resource management and simply having controls on optional spending will all help in the long run. Redundancy is sometimes a short-term fix to the problems that businesses experience in a downturn. The survey clearly shows that making redundancies will cost employers on average £10,000 per head, which could take several months to recoup. There is no doubt many businesses will have to look carefully at their cost reduction options and weigh up the short- and long-term effects to their businesses.”

The survey’s key findings were:

•      Of the 26 per cent of organisations who have contingency plans in place to make further redundancies in the coming year, 59 per cent of them are planning to make redundancies in the next three months. In comparison, of the 73 per cent who don’t have contingency plans in place to make further redundancies in the coming year, just 13 per cent of them are planning to make redundancies in the next three months.

•      The majority of redundancies in both the private and voluntary/not for profit sectors are compulsory (81 per cent) in contrast to the public sector where 62 per cent are voluntary.

•      Managers and professionals and skilled non-manual workers are most likely to suffer from the redundancy cull. 

•      Half of organisations surveyed offer redundancy pay above the statutory minimum.

•      The average cost of making an employee redundant varies greatly across sectors. The average payment in the public sector is £17,926, compared with £8,981 and £7,629 in the private and voluntary sectors respectively. The average payment across all sectors is £10, 575.

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