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Avoiding redundancies

Unemployment is rising to levels not seen in a decade as more and more firms shed staff. Some 600,000 jobs are predicted to go during the course of the next 12 months.

But, despite the gloom, businesses have been advised, wherever they can, to hold on to their staff during the downturn.

While cutting wage bills may seem an option, keeping employees could stand firms in better stead come the recovery, a report from the Chartered Institute of Personnel and Development (CIPD) has said.

John Philpott, the CIPD’s chief economist, pointed out that, although many employers will look at redundancies as a first resort in reducing costs, job losses come at a price.

An average redundancy costs £16,375, the CIPD said, before other consequences, such as falls in productivity, are added in.

Dr Philpott continued: “While making people redundant can seem one of the most straightforward ways of cutting costs, redundancy is itself a significant cost to most organisations with a number of direct and indirect or hidden costs.

“We urge employers to plan for recovery by investing in and growing their people, rather than reducing their workforce. Employers should hold their nerve and focus on retaining talent and investing in the skills of their people.”

How, then, can a hard-pressed employer go about maintaining their workforce while pressures mount on profit margins and operating costs?

Provided there is proper planning and cost management in place, there are a number of options for retaining staff with the know-how and experience that could prove invaluable when the economic gloom finally disperses.

Some of the burden can be lifted from the wage bill by workers who may choose voluntary redundancy or opt for early retirement.

Filling vacancies with existing employees can cut the costs of recruitment, as can training workers so that they are able to take on different or new roles in the business.

Other considerations include the introduction of flexible working patterns which can help to spread duties and responsibilities across a wider range of the workforce.

The best policy, however, is to consult with employees on how a shrinking order book can be managed without significant job losses. A large number of firms have come to agreements with staff on short-time working or temporary shut downs.

Not all employers, of course, will find themselves in a position to keep all of their workers. But imaginative planning can help some businesses avoid the harm to their skills base and their ability to operate competitively in the future that short-term redundancies in the present could inflict.