Employers increase voluntary redundancies to cut costs

UK businesses are three times more likely to encourage voluntary redundancies during the next 12 months compared to two years ago and are also likely to double the outsourcing of loss-making services.

According to the study of employee restructuring techniques by law firm, Irwin Mitchell, 18% are ‘quite likely’ or ‘very likely’ to make compulsory redundancies.

The report, which quizzed over 320 senior business decision-makers, found that a third of businesses had already made compulsory redundancies in the last year, with 75% of those questioned also using a range of alternative cost-saving techniques.

Seven out of ten firms said that they are ‘less confident’ or expect ‘no improvement’ in the UK economy in 2012. Out of those businesses stating that they needed to reduce their employee cost base over the next 12 months, 55% said that they would introduce a voluntary redundancy programme. This compares to 16% of companies who did the same during the last two years.

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The report also saw a sizeable increase from 10% to 21% 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.

Commenting on the survey’s findings, 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 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.”