While many employers were able to mitigate losses last year through measures such as asking staff to take unpaid holiday and adopt flexible working, redundancies will be unavoidable for many this year as the full force of government cuts begins to hit.
The Chartered Institute of Personnel and Development's latest Labour Market Outlook suggests that employment levels will fall significantly this year, with one-third of the 750 employers surveyed admitting that they will be looking to employ fewer people as a result of the Comprehensive Spending Review. More than half (52%) of public sector employers said that they planned to make redundancies in the first three months of 2011.
Those employers planning to make redundancies will, of course, have a number of legal issues to address, primarily around consultation and selection.
Keeping staff informed about proposed redundancies is of vital importance, to avoid falling foul of the Trade Union and Labour Relations (Consolidation) Act 1992, which requires employers with more than 19 staff to inform and consult relevant union or employee representatives about their proposals before these are implemented.
Even where there is no duty to consult collectively, a redundancy dismissal will normally be unfair under the Employment Rights Act 1996 if there has been no or inadequate consultation with individuals.
There are also a number of legal pitfalls that employers need to negotiate when assessing for redundancy. To avoid unfair dismissal claims, what they do has to be fair and objectively justifiable. It cannot be subjective - the selection criteria cannot be discriminatory, directly or indirectly.
But as well as the legal issues, there are a number of "softer" aspects of dealing with redundancy that, if handled badly, can do long-lasting damage to an organisation and its people.
Redundancy: Top 10 pitfalls for employers
1. Defining the pool for redundancies incorrectly.
2. Not offering suitable alternative employment.
3. Absence of a genuine redundancy situation.
4. Failure to carry out a fair selection procedure.
5. Failure to consult properly on collective redundancies.
6. Failure to inform and consult on an individual basis.
7. Failing to consider alternatives to redundancy.
8. Not training managers in how to carry out the redundancy exercise.
9. Not accounting for the extra costs and resources involved.
10. Failing to account for the wider effects of the redundancy exercise.
Steve Blunt, partner at law firm Clyde & Co - and a former head of legal at what became the Amicus union (now part of Unite) - says that these softer aspects are "commonly neglected".
"HR teams tend to be reduced to a minimum and rarely have the luxury of additional time to deal with people in a way they would perhaps prefer to be dealt with themselves in similar circumstances," he says. "When taken to extremes, people can be sufficiently upset so as to be more inclined to challenge an employer's behaviour by filing a tribunal claim. It does pay to be able to spend additional time consulting with individuals beyond the statutory requirements so that they understand the financial background to the decision-making process and that it is no fault of theirs."
There are a number of steps that employers can take to make the process as bearable as possible for those affected, according to Blunt.
"It is back to the luxury of having sufficient time to divide the consultation process into enough segments to keep employees onside - as much as this is possible - and at least make them understand that there is no realistic alternative but to make the redundancies," he says. "Dealing with the three common inter-relationship issues of shock, anger then resignation, the process should ideally be sufficiently long to ensure that individuals reach the resignation stage before termination."
Certain additional considerations can make a significant contribution to "softening the blow". Blunt adds: "For instance, companies might consider offering outplacement support for individuals, particularly those who have not been actively job-seeking for many years, to assist them with interview technique, writing their CV and generally getting out of the house and receiving expert advice on employment opportunities locally."
In addition, employers must also take into account those employees who might not lose their jobs, but for whom the redundancy process is still a grim ordeal, warns Blunt.
"Employers often neglect the impact of redundancies on those who remain," he says. "After making redundancies, it is essential that employers are able to rely on their existing employees to keep the business going and cooperate in running the business as efficiently as possible. In many respects, it is almost as important to deal with these people properly and fairly as it is to deal with those who are likely to be made redundant."
Research from the Institute of Employment Studies (IES) has shown that, when headcount is reduced, the "survivors" may experience a decrease in morale, increased absenteeism, reduced job motivation, reduced organisational commitment and employee engagement, risk avoidance, reduced speed of decision-making and a drop in productivity.
The attitude of the survivors will be largely determined by the management of the change process and the demonstration of procedural justice, as this will contribute to employees' judgement of the fairness of the changes, according to Catherine Chubb, research fellow at the IES.
"It is how an employee feels they have been treated rather than the outcome itself that counts most in their minds and affects their acceptance of any changes," she says. "The way in which any changes are communicated to employees can also profoundly affect the commitment and well-being of the survivors and can determine their perceptions of the current situation and their expectations for the future. It is important to think beyond short-term cost savings when implementing redundancy programmes, and to manage the process of change skilfully."
Jo Ellen Grzyb, counsellor and psychotherapist at employment communications consultancy Impact Factory, says change, by its very nature, breeds uncertainty.
"During this uncertainty, the decision-makers tend to spend all their attention and focus on the logistics of survival," she says. "What they tend to ignore is the impact any change will have on the majority of their employees. They don't mean to, but people on the receiving end can feel ignored, taken for granted and marginalised."
Hand in hand with keeping staff informed is to hear what ideas and suggestions they have about the future of the organisation, according to Grzyb.
"Not only does listening bring out the creativity in most people, it helps engage them and get their commitment during the early stages of the process rather than trying to haul them and their resistance on board once all the decisions have been made," she says.