“Redundancy figures will continue to increase in the wake of the Coronavirus pandemic. Of that you can be absolutely sure”.
This seems to be the message being fed to us and to be honest, few would disagree. According to a BBC article released today, official figures indicated that the number of people on UK company payrolls fell by almost 650,000 between March and June whilst unemployment figures stayed much the same.
The funding of the Furlough Scheme begins to taper off in August and no matter where you turn, the news is brimming with ominous articles about businesses looking to offload large numbers of their workforce when the scheme ends in October. Then look at LinkedIn and the #OpenToWork campaign that is trending with stories of people being made redundant and immediately available for a new opportunity. And whilst the hiring market for certain industries seems to be rebounding, it’s not necessarily a guarantee that the worst is over.
If we look back to the last major economic crash the UK endured in 2008 we saw a clear pattern of redundancy figures as a result. The financial crisis that started in Q2 of 2008 and peaked in September with the demise of Lehman Brothers, was the biggest economic crisis faced by the UK since World War II but redundancy figures didn’t actually reach their peak until 2009.
It’s difficult to make like-for-like comparisons as the support package available to businesses today is significantly better, but this pandemic is sure to have a longer lasting residual effect on economies around the world which, no matter what way you cut it, will affect the UK.
So this begs the question – is the furlough scheme simply delaying the inevitable?
According to leading economists, we can expect to see the full effects of the Covid pandemic on the UK workforce post-October when the scheme ends. We accept that redundancies can be part and parcel of running a business, especially during periods of economic downturn and whilst you can cut costs in any number of ways, ultimately it’s your people that have the biggest cost in most businesses. So it makes sense just to cut down on the number of people in your organisation, right?
No sensible, responsible employer will take the topic of redundancies lightly. You’ve taken time to hire, train and develop good staff – you’ve invested in your people and they’ve been loyal to you – so making redundancies will be your last resort. Whilst some businesses had no choice but to react quickly before the furlough scheme benefits had been fully laid out, as the tapering begins and less can be claimed by businesses, it seems logical to assume that a further wave of redundancies will follow.
But what does that mean for business owners?
Well for a start, it’s important to invest time in creating a headcount reduction plan underpinned by sound business rationale. This is crucial not only to meet statutory obligations, but also to protect your business and give yourself the best chance of a smooth process for you whilst conducting an informed, communicative, fair & respectful process with your employees.
Our vlog series this week addresses ways in which you can do this and you can watch the first vlog here.
We truly hope here at Ad Ingenium that it isn’t a case of ‘the worst is yet to come’. But as someone once said, “Hope for the best, plan for the worst.”
If you need any help or advice on planning for potential redundancies, please get in touch today.