One fifth plan redundancies this summer despite furlough scheme

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Coronavirus uncertainty has caused a significant downturn in hiring intentions, an increase in planned redundancies and the likelihood of paltry pay increases over the coming months.

More than a fifth (22%) of organisations are planning redundancies in the three months to July 2020, up six percentage points on the previous quarter, according to the latest Labour Market Outlook compiled by the CIPD and the Adecco Group.

Just over half (52%) of senior HR professionals polled plan to furlough staff and those already participating in the scheme expected to furlough 60% of their workforce on average.

The number of employers planning to hire more staff had fallen to its lowest level since the quarterly survey began in 2005; just 40% are planning to increase headcount in the three months to July 2020, compared with 66% who said the same in the winter 2019/20 survey.

This meant the report’s net employment balance, which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease headcount, has dropped 25 points from 21 to -4.

CIPD senior labour market adviser Gerwyn Davies noted that the Coronavirus Job Retention Scheme had likely staved off job cuts, but many employers had been able to save jobs that would’ve otherwise been lost through increased homeworking and cost-cutting measures.

“We are pleased that the government has heard consistent calls from the CIPD to extend the job retention scheme and make it more flexible at the same time,” he said. “The next challenge will be for government to work with employers to design the best way to enable furloughed staff to work part-time for their employer, and gradually reduce reliance on the wage subsidy before the scheme ends in October.”

He said employees should brace themselves for pay freezes or cuts in the year ahead, as organisations attempt to preserve jobs. One in three firms have postponed their pay review for this year, up from 14% who said the same in the previous survey.

More than two-thirds (67%) of employers intend to review pay over the next 12 months. On average, private sector firms expect a pay freeze compared with a 2% increase three months ago, while pay expectations remain unchanged in the public sector (1.5% increase) and voluntary sector (2% increase).

In response to the current crisis, many organisations are increasing homeworking (61%), freezing recruitment (44%), freezing or delaying planned pay increases (33%), introducing new flexible working arrangements (32%), cutting bonuses (29%) and cutting training budgets (27%).

“Organisations are doing all they can to keep employees in work, from reducing working hours, freezing hiring and cutting training budgets,” said Alex Fleming, country head and president of staffing and solutions at the Adecco Group UK and Ireland.

“The labour market is undergoing a huge transformation as a result of the current unprecedented circumstances. Recruitment activity has fallen significantly, but it’s positive to see that redundancy intentions have increased only modestly compared with the previous quarter.”