Redundancy – A Costly Solution to Economic Slowdown

Redundancy is a costly solution to an economic slowdown, warns the Chaterered Institute of Personnel and Development (CIPD)

The CIPD has urged small business to consider alternatives before making costly redundancy decisions.

Business consultancy KPMG warns that a slowing economy in the UK will force 38% of employers to make staff redundant this quarter, compared to 17% last quarter.

The news comes as bigger companies like Reed Elsevier make 1000 job cuts.

Firms might realise short-term savings by making staff redundant but may struggle to replace the loss of skills, according to CIPD HR advisor Frances Wilson.

“Businesses need to consider the investment they have made in their staff – including recruitment, training and the knowledge employees have about the business,” she added. “If there is an economic upturn in 18 months’ time, employers might have to go through the cost of recruiting people back to their business.”

There are alternatives to redundancy, she points out;

“Firms could also arrange for some employees to work part time to reduce their labour costs, or offer flexible working to reduce the amount of office space they need.”

With as many as 54% of employers anticipating recruitment difficulties in this period, it appears that businesses are already struggling to find skilled labour.

KPMG’s chief economist Andrew Smith added that the number of firms considering staff redundancy has jumped,

“but the majority still expect to employ the same or a higher number of staff in 12 months’ time."

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