CIPD Lab: Perspectives on the world of work
Thought leadership, challenges and reflections on issues impacting the world of work
Dr Madeleine Petzer advises on ten actions to take to try to avoid job losses
Redundancies and restructures are nothing new. The strategy of reducing headcount to reduce organisational costs is familiar to many organisations. Prior to the outbreak of COVID-19 in the UK, many organisations, including William Hill, Centrica and Jaguar Land Rover, had already announced large scale redundancy plans. Unfortunately, with the coronavirus pandemic outbreak and the negative impact on our economy, we are faced with mass redundancies across the globe. These are unprecedented times, that require specific measures to safeguard jobs, where possible.
Following the outbreak of coronavirus, the airline industry was the first to announce redundancies. Flybe went into administration and Norwegian Air stated that more than 7,500 employees may lose their jobs. Virgin Airlines asked staff to consider voluntary redundancies. The outbreak is also heavily impacting the hospitality industry and thousands of service staff face job losses.
The government’s Coronavirus Job Retention Scheme and Self-employment Income Support Scheme are hugely welcome and will save many jobs. Indeed, employees already made redundant after 28 February may be rehired to be immediately furloughed, with the government covering 80% of their wages. Nonetheless, with the schemes due to last three months and the medium and long-term impact of the coronavirus pandemic on our economy far from clear, the pandemic could still lead to mass redundancies across the globe. A new joint survey from the CIPD and People Management magazine shows that although over 50 per cent of UK employers will look to furlough their staff, one in four expect to make permanent redundancies due to the coronavirus crisis. These are unprecedented times and employers would do well to consider how they can safeguard jobs, where possible.
The end is far from sight and we should expect a snowball impact on job reductions. The UK government’s economic support package will make a huge difference but for some organisations, the pain of this situation is inevitable and business closure may be the only option available. There are strong arguments for employers to mitigate redundancies where possible, not just due to this pandemic, but in general. If they can, they not only serve society better, but can also support the longer-term interests of their organisations.
Do not underestimate the negative impact of redundancies
Findings on the success of redundancies mostly demonstrate that headcount reduction as a method to improve organisational performance, productivity or cost competitiveness tends not to achieve these aims, highlighting a gap between actual results and intentions. Research indicates that most companies that implement redundancies as a cost-cutting exercise fail to reap economic success.
Redundancy programmes have a negative impact on the entire workforce. Those affected include the survivors (employees who remain in the business), the victims (the employees who leave) and redundancy envoys (those who assume responsibility for activities such as the strategy, planning, process, implementation, communication and consultations associated with the redundancy programme).
Redundancy envoys describe the process of implementing redundancies as a rollercoaster of emotions, including shock, horror, anger, sadness and guilt. There is strong evidence to demonstrate that the impact of implementing redundancies is profound, leading to serious negative implications for redundancy envoys and subsequently, the organisation.
The best solution is to explore what other options are available before considering redundancies.
Practical interventions to consider
Redundancies may not always be preventable, but there are undoubtedly actions that should be considered to limit or even avoid them.
1. Do not panic and overreact
Many organisations suffer financial difficulties. At first instance, it is important to have a thorough understanding of the reasons behind the financial challenges. Of course, in the current situation, the reason is obvious.
Redundancies can be very expensive to an organisation, especially if it offers enhanced packages. Consider the following questions: Is the situation short-lived? What are the chances of recovery? If recovery is possible, when is it going to realise? How are your competitors coping and adapting?
Ensure you have comprehensive market research to inform the decision-making process. The worst decision to adopt is to make critical employees redundant. You will need them when the crisis is over. Consider the implications of losing employees with valuable skillsets that are already very challenging to find and retain. If rash decisions are made, how feasible would it be for you to hire talented employees back? Would they join a company that has a reputation for redundancies and that may appear to have lost credibility in the business world?
Another reason to not overreact or implement redundancies hastily is that once you make someone redundant, you cannot fill their vacancy for six months in accordance with employment law. This ratifies the point that the implementation of redundancies is a long-term strategy. If you are thinking of redundancies, consider the reality that you will be without that role for a minimum of at least 12 months. The consultation process itself could take three months, depending on the scale of the redundancy programme, before you even get to the stage of exiting the employee. Carefully consider if the redundancy costs and potential recruitment cost to replace the person in future, combined with the disruption and negative impact, balance out against the potential costs-savings. If not, it probably is not worth considering the redundancy.
We do not know how long this pandemic will impact our economy, but employers should be making contingency plans for the short and medium terms to protect the organisation and its people.
10. Train and develop employees
If employees feel nervous about the stability of an organisation, the most talented are often the first to jump ship. What can you do to retain them? Commitment can be shown through development opportunities and demonstrating the organisation’s belief in a promising future by investing in sensible training. Bolster the organisation’s confidence and motivation levels by investing in your workforce where possible.
Maintain focus in uncertain times
The current position we face is especially challenging for organisations as it is an unknown entity. We do not know how serious this pandemic will become or if it will blow over quickly. We do not know the timeframes to make adjustments for. Hopefully, it will be short-lived and the government’s measures to safeguard jobs will tide us over, but the truth is, we simply do not know.
The unknown creates fear and panic. Organisations need to be as focused as possible to address this situation by being proactive. Do not wait until your business is at a point of no return. Take measures proactively and have both short- and medium-term strategies in place. Most important of all, be safe and be careful.
The CIPD has created a coronavirus hub to provide updated advice, resources and guidance to support employers and people professionals in their response.
Madeleine is Senior Lecturer in HRM at Liverpool John Moores University, having previously had a career as an HR professional. Her research specialises in the impact of redundancies on people and organisations.
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Thought leadership, challenges and reflections on issues impacting the world of work