HR has a huge challenge on its hands to ease the blow dealt to public sector employment as the new coalition government moves to make an extra £6bn worth of cuts by next April, experts have warned.
Minimising compulsory redundancies, engaging staff and addressing plummeting morale will be among the work required of HR teams, who themselves potentially face “inevitable” cuts to HR admin roles, the Chartered Institute of Personnel and Development’s chief economic adviser John Philpott warned.
The Conservative-Liberal Democrat coalition has pledged to achieve additional savings of £6bn to non-front-line services within the financial year 2010-2011, and £12bn worth of spending cuts overall. The extra cuts are subject to advice from the Treasury and the Bank of England, although they are widely expected to go ahead.
Details on how the efficiency savings would be achieved were not set out, but theConservative pre-election manifesto outlined tighter control of public sector recruitment and reductions in discretionary spending including travel, expenses, advertising and consultancy.
The parties said a plan for reducing the deficit would be outlined in an emergency Budget within 50 days of the coalition agreement.
Leading commentators now warn HR departments are in for a bleak future beset by pay freezes and job cuts.
Philpott told Personnel Today: “The impact of £6bn worth of cuts on employment in the public sector in the first year is probably in the order of 50,000 jobs over and above what might have happened anyway. What happens this year is only likely to be a tenth of the total workforce reduction that’s going to happen.
“The key task for HR is maintaining engagement during downsizing. There are no easy alternatives to job cuts. [HR should] look at ways of minimising compulsory redundancies – redundancy packages are quite generous in the public sector.”
Philpott added that HR was in “for a bit of a shock” and should expect an “inevitable” reduction in HR admin roles.
Prior to the election, Francis Maude, now the Cabinet Office minister, told Personnel Today the Tories would look to outsource Whitehall HR and back-office functions within two years if they came to power.
Dean Shoesmith, president of the Public Sector People Managers’ Association, said: “If HR admin does not currently add sufficient value in the service delivery model then it may be provided in different ways, such as self-service systems, outsourced, or re-engineered.”
He also called on the sector to be the “architects of transformation” during the testing period, by supporting public sector leaders in developing plans for transformed service delivery.
“This could include guidance on shared services, TUPE transfers, organisational re-design, business process engineering, and developing our talent pools to deliver new service models, as well as the more operational aspects of retrenchment, such as handling redundancy, redeployment and outplacement,” Shoesmith said.
Ian Brinkley, associate director of The Work Foundation, warned the new government against obsessing with headcount, which could lead to “perverse decisions”, such as extra reliance on temporary and agency staff, even though the cost might be higher.
He described a recruitment freeze as the “crudest tool of all”. “This delivers short-term savings, but is often a false economy. Not replacing key staff can lead to growing inefficiency and loss of expertise,” he said.
The Tory-Lib Dem government is expected to release its full coalition agreement outlining more detail on spending cuts next week.