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. The CIPD/KPMG Labour Market Outlook 'Redundancy Special' reveals that more than a quarter of employers (26 percent) have contingency plans to make new or further redundancies in the next twelve months in addition to those already planned.
Organisations who have already made or planned to make redundancies in the next three months are more likely to be considering further job cuts in the next twelve months. The news comes on the back of grim unemployment statistics, which show that redundancy activity has increased sharply in recent months.
Almost one in five employers say that they are going to enforce the Government's retirement age policy - which allows UK organisations to make workers over 65 redundant without having to provide a business reason for doing so - more vigorously. The report also shows that the average cost for making workers redundant now stands at more than 10, 000 pounds.
Dr John Philpott, CIPD Chief Economist comments, 'The spectre of redundancy is beginning to haunt the UK jobs market once again. Employers have held off from making large scale redundancies until recently but we are now on the verge of a torrent of bad news. 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 in the coming months so as to prevent a nightmare scenario for jobs.
'Ideally, employers will do their utmost to limit the scale of redundancies too. 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 comments:
'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 pounds 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.'
- Of the 26 percent of organisations who have contingency plans in place to make further redundancies in the coming year, 59 percent of them are planning to make redundancies in the next 3 months. In comparison, of the 73 percent who don't have contingency plans in place to make further redundancies in the coming year, just 13 percent of them are planning to make redundancies in the next 3 months.
- The majority of redundancies in both the private and voluntary/not for profit sectors are compulsory (81 percent) in sharp contrast to the public sector where 62 percent are voluntary.
- Managers and professionals and skilled non-manual workers are most likely to suffer from the redundancy cull.
- Half (50 percent) 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 pounds, compared with 8,981 pounds and 7,629 pounds in the private and voluntary sectors respectively. The average payment across all sectors is 10,575 pounds.