Yorkshire Firms Shift Focus to Voluntary Redundancies and Outsourcing to Drive Down Staff Costs - Says Survey

10th July 2012

YORKSHIRE BUSINESSES are almost twice as likely to encourage voluntary redundancies and outsource loss-making services during the next 12 months compared to two years ago according to a report by national law firm, Irwin Mitchell.

The study of more than 300 senior business decision-makers, which was launched to investigate employee restructuring techniques, also found that over a third (37%) of companies had made compulsory redundancies in the last year, with 58% of those questioned also reporting to have used a range of alternative cost-saving techniques. As a result of the current economic uncertainly - highlighted by seven out of 10 firms in the region saying that they are 'less confident' or expect 'no improvement' in the UK economy in 2012 - 24% claimed they were under immediate pressure to reduce staff overheads in the next year. Thirteen percent added that they were 'quite likely' or 'very likely' to make compulsory redundancies. Out of the businesses stating that they needed to reduce their employee cost base over the next 12 months, 56% said that they would introduce a voluntary redundancy programme. This compares to 32% of companies who did the same during the last two years. There was also a significant increase from 12% to 22% in the proportion of businesses preparing to outsource their loss-making services. In addition, the survey found that compared to two years ago, firms in Yorkshire were more likely to remove benefits such as bonuses, freeze pay rises, reduce director pay and benefits and reduce staff salaries during the next 12 months. Commenting on the survey's findings, Liesel Whitfield, an employment associate at Irwin Mitchell's Sheffield office, said: Businesses have been using more inventive solutions than redundancy when tackling staff costs but more now seem to be focussed on some form of redundancy programme. Perhaps this indicates that alternative solutions have been exhausted. Nevertheless, there are signs of more inventive thinking.  Many alternatives can involve changes to employment contracts but well planned and executed change programmes can succeed.  The significant increase in potential outsourcing also shows that some businesses are taking a wider view of the economic downturn. Organisations appear willing to try alternative approaches but with the economy showing signs of further contraction and levels of uncertainty increasing, businesses seem to be combining these with more structural and traditional changes to their workforce. Other key findings of the survey include: - 72% of firms said that they had saved jobs as a result of implementing cost-saving restructuring techniques. - 52% of this group said that over 75% of 'at risk' positions had been saved as a result. - 17% said that they would or might have restructured differently if they had the opportunity again, but this was largely on the basis that they would like to have done more and acted more quickly. - Outside of compulsory redundancies, the most popular method used by businesses to reduce their employee cost base during the last two years was freezing pay rises. This technique will become even more prevalent in the next year. A copy of the full report is available for downloading at www.irwinmitchell.com