Employers planning on further redundancies

31 October 2008

Unemployment looks set to rise, with a significant number of employers aiming to reduce their workforces.

According to a survey of 720 employers, carried out by the Chartered Institute of Personnel and Development (CIPD), over a quarter (26 per cent) said they had contingency plans for new or additional job losses in the next year.

Those firms that have already made redundancies are more likely to be planning further employment cuts over the coming months, the CIPD reported.

The survey found that older workers are more at risk.

One in five employers indicated that they would be stricter in applying the rules on retirement age policy which allow organisations to make staff aged 65 or over redundant without having to provide a business reason for doing so.

The survey also revealed that the average cost to an employer of making a worker redundant has risen above £10,000.

John Philpott, the CIPD’s chief economist, said: “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.”

Dr Philpott joined a chorus of other business representatives in urging the Bank of England to reduce the cost of borrowing: “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.”

He also counselled caution over redundancies, given the cost of letting an employee go: “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.”