Redundancies can cost more than they save

Making staff redundant can end up costing money instead of saving it, according to a survey.

Making staff redundant can end up costing money instead of saving it, according to a survey.

Since the start of the recession, 60% of UK companies have suffered redundancies. Rather than saving the company money however, making staff redundant can often end up costing millions and adding risk. This is because the business can be left with huge information gaps.

A survey commissioned by business solutions provider Parity found one in five organisations can no longer access information held by employees who have been made redundant.

Recession-induced job cuts are also set to have a dramatic impact on the longer-term success of the business, threatening efficiency, productivity, and even customer retention and profit.

"Staff departures can create black holes within a company," said Alwyn Welch, CEO at Parity. "When staff leave, they take with them vital knowledge, experience and understanding which cannot be replaced."

Alwyn Welch said that before instigating any cost-cutting measures involving key staff, businesses must establish what information those individuals hold, what it means to business, how it can be gathered, stored and shared, and who should be able to access it. Only then will it become clear whether the company can really afford the long-term loss of those people departing.

"Redundancies may well help reduce business costs in the short term but they can be false economy. There are more intelligent ways to reduce staff costs and retain knowledge and skills, such as sabbaticals and unpaid leave."

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