Job Losses Cost UK Employers £13bn Over Three Years

  • Businesses shed 470,000 jobs in the year to March
  • Redundant workers received an average £9,362 in 2010
  • Cost of throwing workers on the dole has cost employers £13bn in severance payouts over past three years

Employers have paid out £13.4bn in redundancy payments over the past three years as they have slashed jobs as a result of the recession and the slow economic growth ever since.

The total cost of shrinking staff numbers is revealed in a new report by Wedlake Bell, a City law firm that obtained the figures via a freedom of information request, which said unemployment and cost cutting was “heaping a heavy burden” on the public sector and private firms.

David Israel, head of employment at Wedlake Bell, said: “The sheer scale of these redundancy payments is staggering. The overall financial and human cost of having to make these redundancies has been massive.”

He forecast that the wave of payouts to private-sector employees during and since the recession could now be coming to an end but that payments to public-sector workers now in the firing line as a result of spending cuts are set to increase: “Whilst the worst of the private-sector cost cutting appears to be over, the public sector has now started to restructure and trim staff levels.”

The Wedlake Bell report shows that British employers paid out an average of £9,362 per redundant worker last year, taking the total redundancy payout for the 2010-11 financial year to £4.4bn.

The Revenue & Customs data shows the average redundancy payment equates to 18 weeks’ salary. The average payout last year was marginally lower than the £9,375 paid out on average over the 2009-10 financial year.

Israel said firms appear to have been generous to departing employees, probably to make exits quicker and easier: “On average, businesses have been paying far more than the minimum redundancy payments that they are required to pay by law, no doubt in part to avoid any long and drawn-out court proceedings.”

Statutory redundancy is capped at £400 a week based on age and years of service.

Israel said that many companies were choosing to grant higher payments on the condition that staff agree not to launch unfair dismissal claims against their employers. “Employees can be more motivated to launch a claim for unfair dismissal during a period of slow growth, as there are fewer jobs around for them to go to,” he added.

There were 470,000 redundancies in the year to March, down from 480,000 over the previous 12 months, according to the research. The report warned that redundancy levels were likely to remain high this year, despite the tentative economic recovery.

“We may continue to see these high levels of redundancy even as the economy continues its recovery, as businesses may need to use redundancy as they continue to reshape their businesses. Recruitment may be picking up but these government figures suggest that churn of jobs remains high,” the report said.

Last week more than 10,000 shop workers learned that they may face the axe after a number of the country’s retailers announced store closures, went into administration or warned of the threat of looming insolvency.

The confectioner Thorntons said it would close up to 180 shops, putting more than 1,000 jobs at risk. The flooring chain Carpetright said 50 stores could close as consumers shun purchases amid fuel and food price inflation and rising job insecurity.

Habitat was among several to call in the administrators, putting 750 jobs on the line. The electronics retailer Comet is also shutting stores. The department store chain TJ Hughes brought in administrators after a slump in sales, raising a question mark over the future of more than 4,000 employees who work at its 58 stores in England and Wales.

Wedlake Bell said £3.8bn, or 86%, of the total payout was granted to employees tax-free as a result of regulations that allow the first £30,000 of redundancy pay to be received free of deductions.

Taken from The Guardian: 04.07.11