Firms ‘should consider long-term cost of redundancies’

Firms should consider the ultimate cost of redundancies and use them as a last resort to cut outgoings, after it was revealed it comes at a price of over £16,000 per employee.

The Chartered Institute of Personnel and Development’s (CIPD’s) has advised companies to think of the long-term cost of cutting staff. Research by the CIPD found the price of laying someone off and then rehiring averages at £16,375.

According to the organisation, many businesses will see staff lay-offs as the first resort, meaning they incur further costs when they are seeking growth and have to start recruiting again.

John Philpott, chief economist for the CIPD, says: ‘We urge employers to plan for recovery by investing in and growing their people, rather than reducing their workforce. Employers should hold their nerve and focus on retaining talent and investing in the skills of their people.’

The expert warned that the figure of over £16,000 is likely to be conservative and does not account for the hidden costs of redundancies, such as higher staff turnover and falling productivity.

The British Chambers of Commerce predicts unemployment will reach 3.1 million this year, with the CIPD saying the losses can lead to a decline in morale, motivation and engagement among remaining employees.

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