With surveys suggesting that employers’ hiring confidence is at a low, and as some consider redundancies as employment costs rise, Simon Fowler proposes a pragmatic and long-term approach.
UK employers are facing a challenging period as media reports suggest we could be heading for one of the most significant redundancy waves in more than a decade.
According to the CIPD’s recent Labour Market Outlook, a third of businesses are planning headcount reductions. Employers have dwindling business confidence and are bracing for the impact of NIC and minimum wage increases outlined in the Autumn budget.
This is reinforced by research from the Empowering People Group, which found that 81% of large UK employers anticipate change that will include redundancies within the next year.
Hiring confidence
This rapid pace leaves little room for strategic planning, raising a critical question: Could these cost-cutting measures create a long-term talent deficit that impedes future recovery?
The answer is surely yes. Hasty decisions based purely on cost reductions, without a long-term strategic plan, could have lasting repercussions.
According to the Department for Education, nine in 10 businesses are struggling to fill skills gaps. Implementing redundancies now could exacerbate these challenges, hindering long-term workforce recovery.
Balancing immediate cost pressures with long-term workforce planning is a delicate act, but neglecting the future talent pipeline can create more problems than it solves.
Why short-term thinking doesn’t work
Although many organisations may struggle to avoid headcount reductions in the current climate, the loss of knowledge and specialised skills is a risk to future success.
Moreover, redundancies can damage employee morale and the employer brand, which can hinder future recruitment plans.
Employees remaining in the organisation after a wave of redundancies may also feel anxious and demotivated and suffer from “survivor guilt”, which can decrease productivity and risk higher attrition rates.
So, considering these factors, how can organisations balance cost-cutting with long-term workforce planning?
Transforming ways of working
Instead of the ‘quick’ cost reduction of immediate redundancies, business leaders should consider alternative efficiency measures.
One often overlooked area that offers huge potential is the transformation of the employee relations function. While organisations acknowledge its critical role, a significant gap persists in translating that recognition into tangible investment in transformation, and many organisations still use outdated tools to manage employee relations (ER) matters.
Investment (in technology and training) can transform how employee relations matters are managed, which delivers business-wide benefits.
Indeed, 63% of ER cases in 2024 were successfully resolved by line managers without HR involvement, thanks to having the right tools in place, according to AdviserPlus data.
Simply put, by equipping managers with the tools to handle people matters more effectively, without the need to involve HR in every instance, organisations can reduce sickness absence rates, decrease costly tribunal claims, and vastly improve employee and manager experiences.
This strategic shift fundamentally transforms ways of working, enabling line managers to become more capable and confident people leaders, helping to develop a more engaged and productive workforce.
Data-driven decisions
When employee relations data is captured and analysed effectively, it offers a powerful lens through which HR can assess organisational health and performance.
Data points, such as grievance rates, absence patterns and disciplinaries, can reveal underlying issues affecting employee morale, identify areas of potential risk and highlight trends impacting productivity.
This approach enables informed decisions that improve employee wellbeing and deliver significant cost savings and productivity improvements.
Redeployment and upskilling can offer a more sustainable approach to workforce management.
Investment in the right transformation solution can mitigate the need for drastic workforce reductions and lay the foundation for sustainable, long-term growth.
Forward-thinking organisations also recognise the upskilling advantage and strategic imperative of investing in their existing workforce.
Redeployment and upskilling can offer a more sustainable approach to workforce management that builds a future-proof team instead of shrinking it.
By identifying employees with transferable skills, organisations can fill critical roles internally and create a more agile, adaptable and innovative workforce to work on new opportunities.
Investing in training and development also equips employees with the skills needed to adapt to the changing needs of the organisation and an evolving business landscape.
Seamless collaboration
The full potential of this strategic approach to mitigating the challenges ahead can only be realised through seamless collaboration.
All too often, we see a disconnect between business leaders, understandably focused on immediate cost-cutting, and HR professionals, deeply concerned about future talent gaps.
Business leaders must work with HR to determine the long-term impact of decisions, while HR must demonstrate the strategic value of their strategies.
Open communication and data-driven decision-making are vital. By sharing insights and aligning on strategic goals, organisations can navigate workforce adjustments far more effectively.
Streamlining processes
Despite the benefits of proactive strategies, many organisations are nonetheless facing the difficult reality of headcount reductions, making simplifying redundancy management processes crucial.
Process compliance is more essential than ever. The fire and rehire legal update that came into force on 20 January 2025 enables employment tribunals to increase compensation awards by up to 25% if an employer fails to comply with its duties to collectively consult in the statutory code of practice on dismissal and re-engagement.
Furthermore, last week the government tabled an amendment to the Employment Rights Bill which would double the maximum period of the protective award for a failure to consult from 90 to 180 days.
Technology can help ensure a more compliant and people-centric approach. Streamlining processes can reduce the administrative burden of redundancy processes and minimise the risk of errors that lead to costly tribunals.
This allows HR to focus on providing compassionate support to affected employees and those remaining in the business.
The current economic climate presents significant challenges for business leaders and HR, but adopting a strategic and collaborative approach means they can navigate the storm while creating a more resilient and adaptable workforce.
Balancing cost-cutting with strategic workforce planning offers the ability to emerge stronger and more competitive.
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