CIPD proposes money-saving alternatives to redundancy

The Chartered Institute of Personnel and Development has set out its argument for alternatives to redundancy.

The institute says that, instead of adding to the UK’s two million unemployed, businesses could chose freezing recruitment, terminating temporary agency worker contracts, laying-off employees temporarily, introducing shorter hours, offering flexible working, sabbaticals or unpaid leave, freezing or cutting pay or bonuses, and where possible retraining or redeploying staff.

The CIPD has calculated that the short-term savings from redundancies are lower than the alternatives. A redundancy saves the employer less per employee affected (£16,425 in a full year) than freezing recruitment or terminating agency worker contracts (£27,000).

However, redundancy saves considerably more per employee affected than some of the other alternatives. For example, an employer would have to put five employees on short-term working in order to make a saving equivalent to making one worker redundant. This explains why employers often adopt several methods of cost cutting at the same time, sometimes combining these with redundancy, the CIPD says.

This year has seen a wave of redundancies across the economy, in sectors including IT, finance and manufacturing. However, some firms, such as Honda have opted to moth-ball factories and reduce pay to retain the workforce.

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