Mass redundancies due to COVID-19 avoided by government and employer initiatives

Latest Labour Market Outlook highlights importance of Job Retention Scheme in preventing redundancies

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According to the latest CIPD Labour Market Outlook, in partnership with the Adecco Group, recruitment and pay intentions have dropped decidedly this financial quarter. Further demonstrating the impact of the COVID-19 pandemic on UK employers, the quarterly survey reveals a marked downturn in employment expectations over the next three months, with the job market set to take a significant turn for the worse.

Overall hiring intentions among employers have dropped to their lowest level since the Labour Market Outlook survey began in 2005. Vacancies within transport, manufacturing and business services recorded the biggest drop in recruitment intentions, while jobs within healthcare and public administration remained in strong demand.

The survey’s findings illustrate the significant financial squeeze large numbers of organisations are experiencing as a result of the COVID-19 outbreak and the subsequent lockdown restrictions.

However, so far, employers have been able to avoid making wide-spread redundancies within their organisations. The proportion of employers intending to make redundancies over the next three months increased relatively modestly from the Winter survey, from 16% to 21%.

A key factor in preventing redundancies has been the introduction of the UK Government’s Job Retention Scheme. A significant proportion of LMO employers stated that they intended to use the scheme, and latest CIPD data has shown that it’s introduction has prevented around 4.2 million redundancies.

Employer initiatives in response to the crisis have also had their part to play in avoiding redundancies. In contrast to the 2008 financial crisis, today many more employers are able to transition their staff to more home and digital based working, which has allowed significant numbers to continue working. Other measures introduced by employers in response to the crisis to save costs have included freezing recruitment, deferring pay increases and cutting learning and development budgets.

Gerwyn Davies, Senior Policy Adviser at the CIPD said:

'While hiring and pay prospects have taken a significant turn for the worse, employers have so far held off from making large-scale job cuts. The Government’s Job Retention Scheme is undoubtedly a key factor, but many employers have also succeeded in achieving a step change in homeworking which, along with other steps to reduce costs, have avoided the need for large-scale redundancies. 

'We are pleased that the Government has heard consistent calls from the CIPD to extend the job retention scheme and make it more flexible at the same time. The next challenge will be for Government to work with employers to design the best way to enable furloughed staff to work part-time for their employer, and gradually reduce reliance on the wage subsidy before the scheme ends in October.'

This quarter’s findings also found a decrease in basic pay expectations for the next year. Across all employers the figure was for a 1% increase (down from 2% last quarter). In the private sector, this figure was 0%.

Davies continues:

'The state of the economy will have a big impact on earnings in the next 12 months. Employees should brace themselves for pay freezes or even pay cuts in the year ahead to help preserve jobs.'

Read the full Spring Labour Market Outlook report and findings here.

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