05 January 2009

Redundancies should be a last resort as businesses review costs in the New Year, the Chartered Institute of Personnel and Development (CIPD) said today.

The CIPD has estimated the real cost of redundancy can reach £16,375 per employee laid off, even before hidden costs like higher labour turnover and a fall in staff productivity are added in.

It is urging employers to plan for recovery by retaining their people, rather than downsizing and risking long-term damage to their business.

CIPD Chief Economist John Philpott said:
“Businesses are under huge pressure right now and restructuring is a fact of economic life that can never be ruled out. But while making people redundant can seem one of the most straightforward ways of cutting costs, redundancy is itself a significant cost to most organisations with a number of direct and indirect or hidden costs. This is particularly true if redundancies are an employer’s first resort in difficult times and have to be quickly reversed by renewed hiring when economic conditions improve.

“While the average direct cost to employers of making redundancies can reach £16,375, on top of this are hidden or indirect costs resulting from the effect of redundancy on survivor employees, such as higher labour turnover and a fall in staff productivity.

“This is likely to be a conservative estimate and provides a hard business case for why redundancies should be a last resort in the downturn. We urge employers to plan for recovery by investing in and growing their people, rather than reducing their workforce.”

The CIPD has created a new formula to help employers realise the genuine cost of redundancy on their business:

Real cost of redundancy = (n ×R) + (x ×H) + (x ×T) + ny(H + T) + Wz(P - n)

Where:
• 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

John Philpott said:
“The formula shows how redundancies can impede quick recovery from the downturn. This doesn’t mean that restructuring can’t take place but it should be with a view to the long term and not short term cost cutting.

“Employers should hold their nerve and focus on retaining talent and investing in the skills of their people. It is these people with their commitment, productivity and ability to add value who will ultimately keep individual businesses and the whole of the UK competitive, and put us in a strong position to recover from the downturn quickly.”

(Source: http://www.cipd.co.uk/pressoffice/_articles/050108Costofredundancy.htm)

The Qualifications & Curriculum Authority (QCA) has recently accredited three in-house training schemes. The McDonald’s Basic Shift Management, and the Network Rail Track Engineering training schemes have been accredited as Level 3 (A-Level equivalent), while the Flybe Airline Trainer Programme has been assessed at Level 4 (undergraduate).
Employers will have the chance to award their own qualifications. The accreditation meant that these three companies have achieved awarding body status and their awards can be recognised for entry to universities or even as part of a university course.

Worried about standards? Prime Minister Gordon Brown said this did not mean standards would fall. "It is going to be a tough course, but once you have got an assessed qualification you can probably go anywhere. I think that is the important thing, companies are prepared to train people up which they weren't doing before, so that people have the qualifications for the future."

McDonald’s

David Fairhurst, McDonald’s director of people, said that the scheme would give staff a chance to better themselves, and that even those who left after getting the qualification would become “brand ambassadors for life”.

“Our model is not really about focusing on keeping people at all costs – for a third of our staff we are their first employer, and we convert more young people back into education than any employer in the UK,” said Fairhurst.

The “Basic Shift Manager” course includes 80 hours of classroom study, with modules on customer service, health and safety, food hygiene, finance and even HR. The training would provide a base for staff to rise to higher positions in the company. HR was a prime example, he said.

“The fact is that most of my department started off through this route – once the course has whetted the appetite and [students] show an interest in working for a support department such as HR, we can take this further and support them to take professional qualifications as the next step,” Fairhurst said.

Other retailers should consider going down the same skills route in time for the 2012 London Olympics, he added.

However, Beverley Paddey of Skillsmart Retail, the sector skills council for retail, said that other firms in the sector would have to think carefully before following McDonald’s lead. “It is clear that setting up as an awarding body does have serious implications, including being open to external scrutiny, and we encourage retailers to think about the range of options that are also available,” Paddey said.

The more conventional route of offering formal qualifications via existing bodies was working for other major employers in the sector, such as Tesco and Sainsbury’s, she added.

Network Rail

Network Rail will have a framework of qualifications accredited by the QCA. Staff will work towards credits, each involving around 10 hours of training, with managers having the ability to issue passes or fails. The initial qualification, “Track Engineering”, consists of 12 credits. But all 33,000 staff will eventually be on the framework and earn credits, with some working towards A-level and degree-level qualifications, and even PhDs.

Marc Auckland, head of leadership and development, said: “We already have a comprehensive set of training courses, but being accredited will add to our attraction for new recruits and also help set the standards for the industry. The plan is that whether they join us in track maintenance, in marketing or as a graduate trainee there will be a development path for them.”

John McGurk, adviser to the Chartered Institute of Personnel Development, learning, training and development, welcomed the government’s move. “With an increasing number of UK organisations facing acute recruitment and skills shortages, many employers see in-house training and apprenticeships as a better means of addressing gaps than externally provided courses.”

But any organisations that pursued this route would have to ensure the skills they taught were transferable to other workplaces, McGurk warned.

Adapted from articles published by People Management and BBC News
January, 2008

After years of false starts, tele-working has taken off, as new figures show that almost half the employees at some of Britain’s best companies do some of their work from home.

The proportion of staff working one morning or afternoon a week at home has more than doubled in the past two years, from 14% to 32%, according to research for The Sunday Times 100 Best Companies to Work For, 2007.

One of the reasons why tele-working has taken off is the spread of broadband internet connections. Richard Wainer, principal policy adviser at the CBI, the employers’ organisation, said: “Technology is absolutely vital.” According to Pete Bradon, head of research at Best Companies, which compiled the report, the sharpest rise in tele-working has occurred in some of the most successful companies.

48% of employees work from home for up to half a day a week at Morgan Stanley and Price Waterhouse, and 45% for a number of services companies in consultancy and insurance.
I’ll do them a favour back’.”

He also pointed to the environmental benefits of working from home. “One day a week at home is 20% less fuel. If everybody in the country did this it would make a huge difference,” he said.
Results from the survey, which canvassed 148,645 employees, show that those doing some work from home find many aspects of their job more rewarding. More people are finding their jobs stimulating by working from home than at the workplace. When asked whether they were in their dream job, more than half (51.4%) of those who work from home for some of the time said they were.

(Adapted from an article by
Zoe Thomas, The Sunday Times)