Employers should factor in the provision of personal financial advice ahead of implementing voluntary redundancy programmes, according to consultants Watson Wyatt.
The complexity of a redundancy package combined with other employee benefits, in particular pensions, means that few people offered voluntary redundancy are properly able to weigh up the financial costs and benefits.
Management-level redundancies are back on the agenda for more companies and, according to the 2008 National Management Salary Survey, are running at their highest level since 2001.
“The fear that they may be making a costly financial mistake can hold many people back from taking redundancy so providing up-front financial advice can do much smooth the success of a voluntary redundancy programme,” said Mick Calvert, head of the financial planning group at Watson Wyatt.
“Companies often provide financial counselling after people have accepted voluntary redundancy but we believe it is vital to
help employees have a solid understanding of the full financial impact of taking redundancy before taking the big decision. This is especially so for both older and senior employees whose financial situations are likely to be more complex.”
According to Watson Wyatt, the cost of providing financial advice in advance can be kept manageable through the use of financial education seminars. These may be followed up by individual counselling for those close to making a decision and requiring specific guidance.
“While taking redundancy is obviously a huge decision for most employees, it is also important for employers to ensure all the
information required to make that decision is well understood, ” said Mick Calvert.
“Not only does it make it more likely that the right people will step forward it ensures that the employer brand is not put in jeopardy.”