Bold measures to save jobs such as shorter working weeks and pay freezes may have just delayed redundancies rather than limited them, HR experts have warned.
The Bank of England’s quarterly inflation report last week found the recession had grown deeper than expected, with the pace of recovery likely to be slow. The latest unemployment figures also showed the number of people out of work had continued to rise to 2.43 million, on track to reach an estimated three million next year.
John Philpott, chief economist at the Chartered Institute of Personnel and Development (CIPD), told Personnel Today steps taken to reduce staff pay to limit job losses may have just delayed the inevitable if the economy fails to recover at a quicker rate.
“If an organisation holds onto people and is not making redundancies, then it eats into company profits,” he said. “A firm can tolerate that for a while if it thinks demand for its goods and services will return, but if not, then a second wave of redundancies is expected later this year.”
He added: “This means there will be the same amount of job cuts, but they will be spread rather differently if we get the anaemic style of recovery that’s on the cards.”
Richard Lambert, director-general of the CBI, said: “As the Bank of England suggested, it is possible that pay moderation may have only delayed, rather than limited, further increases in unemployment.”
The CIPD warned the labour market was in deepening distress, continuing to shed jobs at an “alarming” rate and with the genuine level of joblessness already above 4.5 million, when taking into account those classed as economically inactive.
Firms including KPMG, Jaguar Land Rover, JCB and Ryanair all opted to reduce working hours or implement pay freezes earlier this year in a bid to save jobs and hang on to key talent.
At KPMG, nearly 1,500 staff have so far taken up the firm’s offer of working four days a week rather than five, or to take between four and 12 weeks’ holiday at 30% pay – already saving the firm £2.3m in staff costs between March and July.
Dave Condor, people director at KPMG, told Personnel Today: “We do believe that this is a route to save jobs, when it is combined with re-training, redeployment and other options in the firm. These things together have undoubtedly saved jobs for us.”
Philpott agreed shorter working weeks had worked for some companies “up to now”. However, he stressed that even those companies with good intentions could be forced to get rid of staff if economic conditions failed to recover quickly.