Amid warnings of a deteriorating economic situation, UK employers are shifting their focus towards making voluntary redundancies and outsourcing loss-making services in a bid to cut staffing costs.
Sir Mervyn King, Governor of the Bank of England, told MPs on the Treasury Committee today that the economic situation had now worsened to such an extent that forecasts made only six weeks ago had been ripped up.
He was also gloomy about the UK, or other major economies, making a robust recovery until the Eurozone solved its problems decisively and warned consumers that the country was not even half-way through a financial crisis that began nearly five years ago.
His sentiments were also reflected in employers’ attitudes towards the situation. A survey undertaken among decision-makers in 323 organisations by law firm, Irwin Mitchell, revealed that seven out of 10 were ‘less confident’ or expected ‘no improvement’ in the UK economy during 2012.
As a result, 54% expected to come under pressure to cut staff, with 18% saying that they were ‘quite’ or ‘very likely’ to make compulsory redundancies. About a third said that they had already taken this course of action over the previous year.
The most popular approach, however, was to introduce a voluntary redundancy programme, with 55% saying they would take this route compared with 16% that had done so over the last 24 months.
Tom Flanagan, Irwin Mitchell’s national head of employment, said: “Businesses have been using more inventive solutions than redundancy when tackling staff costs, but more now seem to be focused on some form of redundancy programme. Perhaps this is an indication that they think they have now exhausted alternative solutions.”
Alternatives included changing employment contracts, introducing well-planned change programmes and outsourcing loss-making services. The number of respondents preparing to go down the latter route had doubled over the last couple of years to 21%, he added.
Employers also indicated that they would be more likely to freeze pay rises, reduce the number of agency workers that they used, grant unpaid absences, remove benefits such as bonuses and cut staff hours over the next 12 months than they had been two years ago.
A huge 78% claimed to have saved jobs as a result of implementing such techniques already.
