Redundancies should be a last resort, as businesses review costs in the New Year, according to the CIPD.

The CIPD has estimated that the real cost of redundancy can reach £16,375 per employee laid off, even before hidden costs like higher labour turnover and a fall in staff productivity are added in. It is urging employers to plan for recovery by retaining their people, rather than downsizing and risking long-term damage to their business.C

IPD Chief Economist, John Philpott, said: “Businesses are under huge pressure right now and restructuring is a fact of economic life that can never be ruled out. But while making people redundant can seem one of the most straightforward ways of cutting costs, redundancy is itself a significant cost to most organisations with a number of direct and indirect or hidden costs. This is particularly true if redundancies are an employer’s first resort in difficult times and have to be quickly reversed by renewed hiring when economic conditions improve.”

“While the average direct cost to employers of making redundancies can reach £16,375, on top of this are hidden or indirect costs resulting from the effect of redundancy on survivor employees, such as higher labour turnover and a fall in staff productivity.”

“Employers should hold their nerve and focus on retaining talent and investing in the skills of their people. It is these people with their commitment, productivity and ability to add value who will ultimately keep individual businesses and the whole of the UK competitive, and put us in a strong position to recover from the downturn quickly.”