One in three employers planning to reduce headcount by end of September, poll finds

10 Aug 2020 By Francis Churchill

Despite modest increases in hiring intentions and firms taking measures such as pay cuts to avoid redundancies, experts warn of a ‘sombre autumn for jobs’

One in three employers are planning to make job cuts by the end of September as the government winds down its coronavirus support, a poll has found.

Out of the 2,000 organisations surveyed by the CIPD and Adecco Group as part of their quarterly Labour Market Outlook, 33 per cent said they planned to make redundancies in the third quarter of this year. This is a 50 per cent increase in the number of companies expecting to make redundancies compared to the previous quarter.

Private sector firms were twice as likely as public sector organisations to be planning redundancies. Nearly two in five (38 per cent) private sector employers said they were expecting to reduce headcount, compared to less than one in five (16 per cent) in the public sector.

Gerwyn Davies, senior labour market adviser at the CIPD, said this quarter’s outlook was one of the “weakest sets of data” for several years. “Until now, redundancies have been low – no doubt because of the job retention scheme – but we expect to see more redundancies come through this autumn, especially in the private sector once the scheme closes,” he said.

The report was not all bad news, however. Hiring intentions were shown to have increased, with half (49 per cent) of employers saying they expected to take on new recruits in the next three months, compared to 40 per cent in the previous quarter. But confidence remained below levels seen in previous years, and Davies warned that improved hiring intentions “probably [wouldn’t] be enough to offset the rise in redundancies and the number of new graduates and school leavers entering the labour market over the next few months”.

“As a result, this looks set to be a sombre autumn for jobs,” he said.

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The survey also found businesses were likely to keep a tight rein on pay increases over the coming months. Respondents planning pay reviews said they expected to increase basic pay by 1 per cent, compared to a median increase of 2 per cent this time last year. 

There was a modest rise in median pay expectations in the private sector – 0.8 per cent compared to 0 per cent three months ago. However, 40 per cent of employers able to predict the outcome of upcoming pay decisions planned to introduce wage freezes in the 12 months to June 2021.

While this seemed bad news for employees, Davies suggested a pay squeeze for workers could be a welcome move if it helped to preserve jobs. “This could be an important factor in limiting large-scale job cuts, as it was in the last recession,” he said, urging employers to do “all they [could] to avoid redundancies, including freezing recruitment, reducing hours and cutting bonuses”.

The survey found many organisations were already taking measures to prevent redundancies. More than two in five (42 per cent) had implemented a recruitment freeze – with private sector companies in general and those in the hospitality, business services and IT sectors specifically, more likely to be taking this step. A smaller number of employers were also implementing pay cuts (18 per cent), bonus cuts (26 per cent) and pay freezes, or delaying pay rises (33 per cent).

Alex Fleming, country head and president of staffing and solutions at the Adecco Group UK, said there was also a positive trend in the number of candidates applying for higher-skilled jobs, as well as an increase in individuals looking to upskill themselves.

“As organisations continue transitioning into the new era of work, there will be ongoing shifts in working patterns – not only for employees but also for those who are just starting out in their career,” Fleming said. “Therefore, businesses must demonstrate resilience and adopt new approaches to closing the skills gap by investing in upskilling and reskilling workforces.”

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