Don’t take drastic action to survive this recession

When chancellor Alistair Darling said that the UK could be facing its worst economic slump in 60 years, he seemingly failed to consider the media backlash or resulting damage-limitation exercise he and the Labour Party would then face.

Arguably he got his facts wrong since today’s 5% inflation and 5.4% unemployment is minimal compared with the 27% inflation and 12% unemployment highs of the 1970s and ’80s. But while pay remains static the slump is having a real impact on recruitment, training, bonuses and other benefits, such as flexible working.

And it’s not over yet. Industry bodies have predicted there will be more job losses to come across all sectors.

Job losses

The British Chambers of Commerce predicted that up to 300,000 jobs would be axed by 2011 as the economy goes into reverse.

And as many as two-thirds of employers will be cutting jobs in the coming months according to a survey of 1,403 employers by law consultancy Peninsula. The latest TUC survey reported that more than three million workers fear they will lose their job in the next year because of the economic slowdown.

According to several industry experts, HR professionals must be careful not to act too hastily and only want to cut staff, training and benefits as a last resort.

Harvey Reid, partner at Laceys Solicitors, told Personnel Today: “Nobody knows how long the downturn will last. My impression is that the lesson people have learned from previous recessions is to hang on to staff and training because they know things will recover.”

Peter Reilly, director of HR, research and consultancy at the Institute for Employment Studies, agreed. “One of the mistakes in the past in managing a downturn has been letting too many people go,” he said.

But if an organisation must make redundancies to weather the storm, it must approach it strategically.

“Who do you need to keep? Who do you need to remove and who do you not mind going?,” said Reilly. “Organisations need to look not just at now, but at the next few years and make sure they have the resources available. Where will the gaps be and what skills are more acquirable than others?”

Legally compliant

As the credit crunch deepens there will undoubtedly be more job losses. But John Philpott, chief economist at the Chartered Institute of Personnel and Development, warned that any redundancies would have to be handled very differently to previous recessions.

“Employers have to make sure they follow correct legal procedures and that everyone is consulted and informed. You can’t just do it overnight.

“One thing HR directors should worry about is that, compared to previous downturns, there are now more employee rights. Make sure you are legally compliant. The first thing people used to do when cutting staff was look at older workers, but we have age discrimination in place now,” Philpott added.

Flexible working

HR departments could consider alternative ways to reduce costs instead of job cuts. Some organisations are cutting part of their flexible working patterns in favour of axeing expenditure. Oil giant BP, for example, plans to terminate its nine-day fortnight scheme.

But Philpott insisted most companies were keen to offer flexible working as a benefit instead of pay increases or bonuses.

Reid agreed: “One of the effects of the credit crunch is that employers are in some ways more prepared to consider flexible working requests. It can often spread times at which employees can deal with customers over a wider period.”

A CBI study out yesterday (Monday) said almost half of all 513 employers (46%) surveyed offered home or remote working to staff, as bosses may be trying to cut their carbon footprint or employees are avoiding a troublesome commute.

Rewarding employees

Reilly said it was important that HR teams looked at what their organisation gained from reducing certain benefits, and balance that against the effect it will have on staff morale. He also warned against any knee-jerk reactions, particularly if the organisation will have to reinstate the benefits again when the economy improves.

Bonuses are typically hit when there is a downturn, he said, but that tends to be a natural occurrence because they are tied in to organisational performance. But it is when companies choose to cut benefits that staff feel aggrieved, as happened when Marks & Spencer cut its redundancy entitlement.

Training is also traditionally cut during a recession. HR professionals told Personnel Today earlier this year they expected to see further resourcing cuts in learning and development as the credit crunch bites. But Philpott believed this was happening to a lesser degree than might be expected.

“My hunch is that training budgets are suffering a bit, but spend hasn’t suffered as much as it would have 20 or 30 years ago. People are trying to preserve their training budgets.”

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