Unemployment reached a four year high of 5% (over 1.7 million) in November 2020[i] and is forecast to increase to 7.5% during 2021 – this equates to a staggering 2.6 million people. There are already hundreds of thousands of people who are now out of work and in a double ‘downturn’; managing both joblessness and the impact of lockdown. This unique situation presents a whole host of challenges to those concerned: financial, mental and emotional.
After April 2021 the Government’s furlough scheme will stop and there will no doubt be more redundancies to follow as organisations are unable to afford to pay all their staff. This is the time to be planning ahead for a potential restructure and making this transition as smooth and cost effective as possible. With this in mind, I’ve been investigating how organisations support staff made redundant, as well as listening to the experiences of those who have lost their jobs. For this exercise I’ve engaged with leaders, HR managers and individuals impacted from organisations of all sizes, and across a range of different industries.
- The good news is that over half of the organisations engaged offer some form of career transition support to staff. This ranged from light touch internal career support such as CV writing and job search and/or wellbeing support such as a counselling helpline (via an employee assistance programme); to comprehensive externally procured support in the form of an outplacement programme (e.g. 3-6 months of support).
- A number of the organisations offering tailored career support were the smaller large employers (250-500 employees); and not just large national or international employers with much larger staff development budgets and support infrastructures.
- A couple of individuals left their organisation feeling ‘ok’ about the transition at the time and did not feel ‘unsupported’.
- Just under half of the organisations engaged offered no type of career transition support to staff – this wasn’t just the small or medium sized enterprises as one may expect; it also applied to larger international employers over 3000 employees.
- Most individuals had a negative experience which left them feeling disgruntled and under-valued based on the way they were treated; both in terms of a lack of compassion and empathy, and a lack of practical and emotional (wellbeing) support with the transition.
- Whilst ‘off the shelf’ support was offered to some (EAP helpline for instance), individuals did not feel this was sufficient, and it was often viewed as impersonal or hard to access. As a consequence they struggled both with the practicalities of job search as well as the emotional and psychological impact.
- Those individuals that initially felt equipped to handle the career transition without specific support experienced challenges and setbacks several months down the line and needed support at a later date.
- Organisations were aware of and concerned about a lack of HR time and expertise to manage the transition and support individuals directly, but did not necessarily have the appetite or means to address this.
- There is a lack of intelligence and data collected from exiting employees and survivor staff to understand needs and improve the redundancy transition experience for all involved.
Scenario planning for redundancies in 2021
So, what can we learn from these experiences about how redundancies should be approached? The first step is to do some scenario planning and impact analysis considering the situation on a holistic level. What are the foreseen risks and impacts (positive or negative) in as far as:
Staff morale How will this be impacted? What message do you want remaining staff to receive about how they will be treated in future? How could staff morale impact on survivor retention?
Productivity How could the morale of remaining staff impact on absenteeism and productivity levels and in turn impact on income generation or turnover?
PR and brand reputation What messages will customers and stakeholders receive about company values and social responsibility? How would you like them to perceive the approach to managing the people changes?
Customer engagement: What do prospective customers value in organisations they do business with? How could a restructure (and how it is handled) impact on engagement with new customers?
Future hiring How will a restructure impact on future hiring? How likely are departing staff to return to the organisation in future if opportunities arise?
Staff conflict What is the potential risk of grievances and wrongful termination cases from unhappy staff?
The financial impact:
CIPD[ii] calculated the average cost of making a redundancy can reach up to £16,000 per person. However, in determining the variables and overall costs, organisations often fail to take into account the impact of indirect costs resulting from the effect of redundancy on survivor employees, such as staff turnover and a fall in staff productivity due to low morale and reduced motivation levels. A formula has been created to calculate these costs as you can see below.
|Cost of redundancy = (n x R) + (X x H) + (X x T) + ny(H + T) + Wz(P – n)|
n = number of people made redundant
R = redundancy payments
X = number of people subsequently hired
H = hiring costs
T = induction/training cost y = percentage quitting post-redundancy
W= average monthly staff salary
z = percentage reduction in output per worker caused by lower morale
P = number of people employed prior to redundancies
In addition to these variables, I would also add absenteeism and (worse case scenario) potential litigation fees; should grievances arise.
What can be done to mitigate these risks and offset the negative impacts?
The obvious focus and priority of most organisations is to reduce costs and avoid any additional expenditure and save as many jobs as possible. From a high level commercial viewpoint this makes sense – costs are a major driver for decision making and often the main rationale behind the restructure in the first place. However, a more rigorous approach to financial forecasting may reveal a number of other risks and hidden costs that may arise from the transition unless carefully mitigated. A small investment in each employee’s transition through an outplacement programme can help mitigate against these risks and offset other higher ‘unforeseen’ costs.
- Investing in those leaving the business can have a positive ripple effect on both internal and external stakeholders – survivor staff and customers.
- Showing people ‘that you care’ and giving them a dedicated outlet and support infrastructure can help dispel negative feelings and boost morale; (including for the survivors); reducing the risk of absenteeism and a drop in productivity; and (worse case) help to avoid costly and time consuming grievances.
- A basic outplacement package can be sourced for as little as around £500 per employee and this cost is relatively tiny compared to the overall costs associated with redundancy.
Crucially, investing in those staff leaving can realise both short and long term positive benefits – equipping individuals with the motivation, confidence and tools to rise to the challenge, secure a new role and to achieve this in less time. From a social and ethical perspective it also doesn’t seem right to not support those finding themselves jobless in the middle of a pandemic. Ultimately we must ask ourselves how we would wish to be treated if we were in this position. This is an opportunity to positively impact on the lives of those around us, and get the UK plc economy back on track.
Get in touch to find out more about how I can help your business and staff transition with my Activate Outplacement Programme. This provides the tools, insights and support to individuals to manage their career transition and boost their wellbeing.