Redundancy Figures ‘Show The Impact Of Recession On Employers’

HMRC Data Highlights 'Difficult Dilemmas' Of Past Year


New figures which show that redundancy payments exceeding £4 billion have been made over the past 12 months demonstrate the very real impact that the current economic climate is taking on many organisations, an employment expert at Irwin Mitchell has warned.

Data from Her Majesty’s Revenue and Customs, released through a Freedom of Information request, has revealed that the figure of £4.4 billion was recorded over the 12 months to March 31st.

The figures also revealed that the average redundancy payout over the period analysed was £9,362 per person.

Matthew Brain, a Partner and expert in employment law at Irwin Mitchell, said the figure showed the difficult dilemmas that many employers have faced in the past year.

He explained: “The key question that organisations of all kinds have had to face up to is whether, in the long run, it is more prudent for them to make redundancies rather than hang on and see if they can ride out the economic storm.

“This is an issue which undoubtedly affects those both in the public and private sectors, although there are often different considerations in each case. For instance, workers in the former are often, but not always, more expensive to make redundant than the latter because severance pay is often enhanced well above the basic statutory amount.

“It can be assumed that a large proportion of the quoted cost in the HMRC figures is attributable to public sector redundancies, and that of course is a result of the Government`s decision to make cuts.

“However, private sector employers are in a different position. There is no doubt that most regard redundancy as a last resort, but the market trends in all sectors at the moment unfortunately mean that many employees have had to be released to ensure businesses have the best chances of surviving.”

Matthew added that there are a number of ways that employers can potentially save on the costs that can be linked to redundancy.

Suggesting some examples, he said: “Firstly, employers could consider strategies which would see them do their utmost to ride out the recession – meaning they would not only preserve their workforce but also save on redundancy payouts.

“Possible ways of addressing this could be to cut any reliance on agency workers, offering unpaid leave, the introduction of wage freezes or reductions, or the implementation of packages to restructure the organisation.

“Secondly, there is the option of looking to avoid redundancy dismissals by making amendments to employment terms, including choosing to abolish collective bargaining agreements. The only danger is that, despite the best intentions behind this option, it could cause unrest in the workplace, should employees or their union resist change. .

“However, despite the often negative connotations which arise   around the subject of changing employment terms, it is possible to do so without creating undue stress or strain within the work environment

”Workers are  often  open to discussion about such issues, particularly during a recession and  the Bateman v Asda case – in which Irwin Mitchell’s National Head of Employment was involved – establishes that.”
“It is possible to reserve the right to make changes where it is in the interests of the business to do so. Experience tells us that challenging times can produce inventive solutions to employment issues.”