The number of planned redundancies in the UK rocketed by 54% in the 12 months ending 31 July, according to new research.
Successive rises in interest rates have piled pressure on UK business’ cashflow, resulting in a leap of 83,382 planned job cuts, up to 237,017, in 2022/23 compared with 153,635 in 2021/22, according to analysis from employment law firm GQ Littler.
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Since December 2021, the Bank of England has raised rates from 0.1% to 5.25%, making it significantly more expensive for businesses to service loans.
The high rate of wage growth, estimated by the Office for National Statistics as a 7.8% average increase between April and June 2023, has pushed business’ cash expenses even higher.
Some sectors have seen even higher pay growth, with pay packets for finance and business professionals growing 9.4% in the same period.
The double impact on business’ cashflow has seen many look to redundancies as a potential cost-cutting measure, according to Caroline Baker, partner at GQ Littler.
She told HR magazine: “The last year has seen a real change in confidence in the economy.
“In particular, inflationary pressures and the UK looking like it might be dipping into recession have meant that companies are now looking carefully at their structures and seeing where they can make savings to keep them profitable, or at least afloat, through a tougher economic market.
“The tech sector has had a particularly hard time, but we are now seeing companies making cuts across nearly all sectors.”
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Any company looking at redundancies would be wise to plan carefully, Baker added.
She said: “From an HR perspective, the key starting point is how many redundancies are you looking at.
“If you are planning 20 or more redundancies, then you will need to carry out a collective consultation exercise.
“The key there is taking the time to properly plan the exercise and not rushing into it without first gathering all the information that the employee representatives need and will ask for.”
A well-planned collective consultation, she added, can be completed over two or three weeks.
As for the selection process, she said, it is important for HR leaders to push the business hard on their desired selection criteria and scores for employees in pools, to ensure they are justifiable.
“While businesses have a wide discretion on what selection criteria they use, HR’s role is to ensure that the criteria are as objective as possible and that there is no discriminatory element in any of the criteria.”