Redundancy support in times of high unemployment
Why providing outplacement or redundancy support is more important than ever.
Covid-19 is impacting businesses and their employees on a previously unimagined scale. Unemployment in the UK is expected to rise by at least 2.5 million, faster than in any of the previous three recessions.
In this uncertain and difficult economic climate, many companies will need to take the difficult decision to make redundancies to reduce costs and create a leaner and more sustainable organisation. This will be costly: the severance and administrative costs of redundancies can present a heavy financial burden in this transition. And with budgets under such pressure, organisations may be questioning whether they should add to these costs, even by a small percent, by providing outplacement or redundancy support to affected employees.
In thinking through this question, companies should consider that letting people go is always difficult but letting them go facing such a challenging job market raises the difficulty to another level. Employees will be leaving into an extremely competitive job market. According to the Financial Times, the number of vacancies in the first 5 months of 2020 was already 40% lower than the same period the prior year. And some of those facing redundancy may find their job category is nearly eliminated in the market and will have to transition into whole new roles. Providing those employees with relevant and timely support to help them secure their next move can make all the difference, not just to the individuals concerned but also to the colleagues they leave behind and the line mangers and HR leaders involved in the process. In a recent survey we conducted, more than a third of HR leaders said making people redundant due to the impact of COVID-19 was much less stressful if they were able to support people in finding a new job.
Although most business leaders acknowledge that supporting employees facing redundancy is the socially responsible thing to do, the rising pressure on budgets means leaders must present a robust commercial business case for all expenditure. It is important to reflect the varied tangible benefits experienced by organisations as a result of offering career transition support and understand there is a compelling business case.
Relatively low cost
The cost of career transition is generally a fraction of the severance costs, but often overlooked until too late. However, that fraction is the portion most likely to generate the biggest impact for a redundant employee. Many businesses unfortunately don’t factor in those costs early enough; they miss accounting for career transition in the restructuring project, leaving those costs as a burden on operating expense just when companies can least afford it. It’s important to fight for those costs early. The severance package will soon be spent, but the career transition service will impact for a lifetime.
Reduction in legal costs
Providing career transition support helps minimise and avoid legal risk, a key driver cited by 12% of participants in a recent survey. A study by the Centre for Organisational Research found that legal action reduced by 72% amongst employees using outplacement services with their displaced staff. And it’s not just the legal bills; the administration and impact of legal cases is a drain on the company.
Improved employee morale, motivation and productivity
Employees remaining with the organisation can be as profoundly impacted as those individuals who lose their jobs. Feelings of insecurity, anxiety and demotivation are all too common and can quickly and negatively impact performance, sickness absence and productivity. One study showed those left behind after a redundancy had a 40% drop in morale and a 20% drop in productivity. Seeing friends and colleagues being let go without adequate support, with the knowledge that it could so easily have been them, only adds to the feelings of unease and taints their opinion of the organisation.
Employees with these negative emotions and unfavourable views of their employer are unlikely to provide the discretionary effort and collective input organisations need to flourish during such difficult times. In research conducted by the Aberdeen Group, 63% of organisations surveyed cited the desire to improve engagement and retention amongst existing employees as a driver of outplacement initiatives. The same research found that best-in-class companies are 2.5 times more likely to use outplacement services.
Findings by the Centre for Organisational Research (COR) showed that in businesses using outplacement services, both productivity and profitability increased in the 12 months following downsizing, with staff turnover, sick days and lateness remaining the same in the same 12-month period. When comparing businesses using outplacement services with those which did not, productivity increases were twice as common and profit stability or improvement was 50% more likely – evidence that the benefits are tangible, not merely theoretical.
For a company looking past the pain of the current restructuring to the thriving company it seeks to become, it is important to consider the impacts on the remaining employee base. Knowing the departing employees have received care and support helps the whole organisation quickly move on from the restructuring and become focused on the future.
Brand and reputation protection
Social media allows people to share their views to thousands in a matter of seconds. Negative experiences relayed to the masses can quickly damage the employer and customer brand. The speed and high impact this can have explains why our research shows that 71% of participants cited “improving reputation and protecting the brand” as the key driver for procuring outplacement. On the other hand, positive experiences and opinions can also be shared at lightning speed with huge reach. Providing genuinely useful help to employees going through career transition can therefore help to protect and even enhance the organisation’s brand and reputation.
With Covid-19 causing high levels of unemployment, the spotlight is on companies to do the right thing by their people. Customers, employees, the media and wider society are taking note of which companies are being socially responsible and providing support to their employees so that they can be in the best possible position to secure their next move, and even more importantly those that are not.
Attracting future talent and shortening the time to hire
Research by Aberdeen Group shows organisations with formal outplacement initiatives are 81% more likely to shorten the time taken to fill key positions. In fact, they’re two and half times more likely as those without outplacement programmes to indicate that this metric improved by 10% or more. Due to the faster rate at filling vacancies, these organisations are nearly 50% more likely to reduce the cost per hire too.
The right thing to do; socially and financially
Your company may want to provide outplacement support because it feels good; you are giving your departing employees the best chance to land on their feet in a competitive job market. The good news it is also the financially responsible thing to do. By reducing legal costs, improving the morale and productivity of your remaining business, protecting your brand, and speeding up future recruiting, you will more than pay for the costs of the programme. Outplacement support only represents a fraction of the overall cost of a redundancy package, yet is arguably the only part that offers a genuine return on investment.
The Financial Times 08/06/20