A few weeks ago, you may have read an article in the Post by my colleague Chris Piggott in relation to an imminent Irwin Mitchell report looking at the techniques businesses are using in order to reduce their employee cost base.
The results are now in and they certainly make interesting reading.
As a result of the current economic uncertainly - highlighted by seven out of 10 firms which responded saying that they are ‘less confident’ or expect ‘no improvement’ in the UK economy in 2012 – over half (54 per cent) said that they were either clear about or still uncertain as to whether they needed to reduce staff overheads in the next year. Eighteen per cent added that they were ‘quite likely’ or ‘very likely’ to make compulsory redundancies during the same period.
Out of those businesses stating that they needed to reduce their employee cost base over the next 12 months, 55 per cent also said that they would introduce a voluntary redundancy programme. This compares to 16 per cent of companies who did the same during the last two years.
The report also saw a sizeable increase from 10 per cent to 21 per cent in the proportion of businesses preparing to outsource their loss-making services.
In addition, the survey found that firms are more likely to cut down the use of agency workers, freeze pay, grant unpaid absences, remove other benefits such as bonuses and reduce staff hours in the next 12 months compared to two years ago.
Businesses have been using more inventive solutions than redundancy when tackling staff costs but more now seem to be focussed on some form of redundancy programme. Perhaps this is an indication that they think that they have now exhausted alternative solutions.
Nevertheless, there are signs of more inventive thinking. Many alternatives can involve changes to employment contracts, but well planned and executed change programmes can succeed. The significant increase in potential outsourcing also shows that some businesses are taking a wider view of the economic downturn. Challenging times create inventive solutions.
Organisations appear willing to try alternative approaches but with the economy showing signs of further contraction and levels of uncertainty increasing, businesses seem to be combining these with more structural and traditional changes to their workforce.
* Fergal Dowling is employment partner at Irwin Mitchell