What is the cost of redundancy?

8 01 2009

According to research published by the Chartered Institute of Personnel Development the answer is approximately £16,000 per person.  They reached this figure by using a complex formula where the cost of redundancy = (n x R) + (X x H) + (X + T) + ny(H + T) + Wz(P – n).  There isn’t space here to list all the individual factors, but they include the obvious costs, such as size of redundancy payments, number of people made redundant, hiring and training costs as well as perhaps less obvious ones such as the reduction in efficiency caused by low morale of remaining workers. The one costs that doesn’t seem to be factored in is management and HR time involved in putting together and executing redundancy programmes.  Judging by some of the clients I am seeing at the moment, there are plenty of employers out there making  a hash of cutting back their workforces.  For the full press release go to www.cipd.co.uk.

The main thrust of the research is to point out that redundancy can be a short term solution and one that has additional hidden costs that may not be clearly quantifiable.  The authors are pointing out, fairly sensibly it seems to me, that redundancy programmes are not the cure all for cutting costs that they might seem.   What is certainly not quantifiable is the personal cost of redundancy, not just to the employees involved but to their families as well.  There is the stress of wondering how the mortgage will be paid (although at least interest rates are not at the levels they reached during the last recession in the early 90s) and the loss of self-esteem.  I’d be interested to see some research that tries to quantify all these costs  to the individual.  Please let me know if you know of any.


This article will appear in the “Docklands” and “Peninsula” newspapers week commencing 12th January 2009




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