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Risk of redundancy remains high in 2013

Around 35% of companies in the UK either intend to make redundancies or are considering making redundancies during 2013. Around 62% of these companies are in service based industries.

Europe-wide survey

These are the stark findings of a recent survey carried out by Aon Hewitt, the global human resource solutions business of Aon plc.

The European survey, which also investigated company intentions regarding salary increases, took place in January 2013. It covered 44 countries, 395 organisations and included more than 2,145 individual local country data submissions. The UK element of the survey included responses from 255 organisations across a variety of sectors.

According to Aon Hewitt, only Greece reported a higher percentage of companies expecting to make redundancies than the UK out of all the countries covered in its study.

Andrew Macleod, leader of Aon Hewitt’s pay research practice in the UK, explained that the UK’s high figure may stem in part from UK organisations feeling that they continually have to adapt and reorganise to remain competitive in what is still a volatile economic environment.

On a more positive note, he said, the the same organisations are also signalling that increases in salary budgets are holding strong at a rate of 3% – but with marked differences between industries.

Additional survey findings

In addition to the redundancy figures, the survey found that:

  • Pay freezes have increased from 7.3% of organisations in 2012 to 13.5% of organisations in 2013.
  • Pay budgets are broadly stable (albeit with a slight decline) at 3.0%. This is in line with RPI of 3%.
  • Almost half of organisations are now primarily setting their salary budgets in order to remain market competitive. A significant minority (29%) set the budget based on business performance.
  • The highest concentration of pay freezes is expected in the Construction and Engineering industries.
  • No pay freezes were being considered by organisations within Commercial Real Estate, Pharmaceutical, Energy, Insurance and Food and Beverage industries.
  • Only 6% of organisations expect their wage bill to decline in 2013 while 60% expect it to increase.

Other surveys paint a similar picture

Other surveys have found an equally pessimistic prediction of redundancies in 2013. A study by Right Management, the talent and career management expert within ManpowerGroup, found that 8% of UK employers are unsure whether they will need to make redundancies over the next six months. This figure represents a sharp rise over the 2% who reported the same six months previously.

Right Management also found a fall in the number of companies reporting that they will not be making any redundancies in the first half of 2013 – 77% compared to 81% in 2012.

“It would appear that businesses are losing confidence that they will get through the next six months without making redundancies which is concerning,” commented Mark Hodgson from Right Management. “Employers don’t want to lose talented staff but they often think that making redundancies is the only way they can cut costs.”

More positive messages

However, according to Aon Hewitt’s Andrew Macleod, it’s not all bad news. The survey findings suggest that the impact on the overall economy will not be as deep as the headline figure on redundancies might indicate.

Over 90% of companies expect to increase their wage bill, or at least maintain current spend, he said. In addition, around a third expect recruitment activity to increase, and only 6% of UK employers surveyed plan to implement a recruitment freeze.