Last year the cost to the UK economy of redundancy was £10.3 billion. One of the conclusions of a recent panel debate about redundancy and cost-cutting alternatives is that first choice strategic use of compulsory redundancies is a sign of failed management at a number of levels.
The panel, which included TUC general secretary, Brendan Barber, and ACAS chief executive, John Taylor, discussed ‘Why redundancy isn’t working’, and the alternatives that provide practical ways to reduce costs and retain skills. Brendan Barber warned that redundancy would continue to be an issue for many organisations, especially in the public sector, over the coming year. He said: “According to the Institute of Fiscal Studies, the Government has only implemented six per cent of the cuts for deficit reduction, with 94 per cent still to come. “The public sector is and will be hit hardest: usually it accounts for just six per cent of redundancies, but last year it accounted for 20 per cent.” More than 632,000 people were made redundant in the last year. According to the CIPD, it costs £16,375 on average to make someone redundant. This suggests that last year the cost to the UK economy of redundancy was £10.3 billion.
In looking at the reasons why compulsory redundancy happened, the consensus view was that it was a failure of management at various levels, starting with better long term planning, communications with employees and more consideration and care in staff recruitment. David Lennan, a former director general of the British Chambers of Commerce and a founder of Staffshare, explained: “Recruitment is undertaken in an amateurish way. Considering that an employer will pay an average employee around £0.5 million over 10 years, they need to be certain that they are getting the right person in the first place.
“Once you have the right person, and have invested in them, including in their training and development, you certainly shouldn’t be wasting that money by throwing them away, making them redundant. “Economic downturns come and go, but they don’t happen overnight. It is the job of directors to monitor this, and manage the business accordingly. They need to manage capacity issues in a different way, taking a more strategic approach.” John Taylor said: “If we are to reduce the need for sudden, significant redundancies then we must change the way we fund and save within our businesses. Part of that is finding new ways to retain the investment in our skills, our most valuable resources – people.”