Small company staff redundancies set to rise as downturn deepens

A business organisation has warned that spiralling costs and a lack of credit is forcing some small companies to consider making staff redundant in order to survive the downturn.

The Forum of Private Business (FPB) says that its legal advice line experienced a 68% increase in calls on employment in September. Redundancy is the main issue for FPB members, with 12% of total calls relating to redundancy situations.

The organisation says that it is receiving a growing number of reports from its members that banks are tightening their lending facilities, and that costs, including utilities prices, are getting out of control. In addition, more than 50 new regulations came into force on 1 October 2008, including an increase in the minimum wage, additional maternity and adoption leave rights and regulations on occupational pension schemes.

According to the Office for National Statistics (ONS), the number of people claiming unemployment benefit in August increased at the fastest rate for 16 years, reaching 904,900. The ONS recorded a total of 1.72 million people out of work – an increase of 81,000 from the previous quarter. However, in the three months to August, the number of jobs available decreased by 56,900 from the previous quarter, to 613,200.

Further evidence from the organisation suggests that smaller employers are looking reduce costs, including those related to employment. More than one in three calls (35%) received by the FPB’s member helpline – which is a separate service to the legal advice line - were from members concerned about employment issues. More than 9% were specifically about redundancies.

The FPB is advising small companies to seek advice on matters of employment early. For example, as soon as a disciplinary problem becomes apparent. More than 28% of calls received by the helpline in September related to disciplinary and conduct issues, followed by employee absence, which comprised 8% of calls. However, some members have contacted the FPB’s legal advice line only when the matter has progressed as far as a disciplinary hearing.

Redundancy Tips

Reports of widespread redundancies are being reported in the media. But employers are in danger of walking into a minefield of costly and time consuming problems if they mismanage the redundancy process and fail to plan, according to Phil Allen, employment law partner at leading North West law firm Mace & Jones. You can read his 10 top tips for employers who are faced with a redundancy situation here.