There will be redundancies and they will be expensive

The last government failed to reduce the size of civil service redundancy payments but the Coalition is determined to have another go. Given that the last attempt foundered on the judge’s insistence that the 1972 Superannuation Act is inviolable, any change to the redundancy scheme will require an Act of Parliament. It will therefore be interesting, and entertaining in a morbid kind of way, to see how the government plans to implement the new terms by 15 September this year. With around five weeks of parliamentary time, a flaky majority and the probability of industrial action over the summer, the government hasn’t left itself much room for manoeuvre.

Into the fray, for the second time in as many weeks, wades John Redwood MP with some more funny numbers. Like the public sector unions, Mr Redwood doesn’t see why anyone needs to be made redundant. You can get rid of 600,000 public servants in four years by relying on natural wastage, he says. 300,000 employees leave the public sector each year, he claims, although he doesn’t say where he gets his figures from.

According to a recent CIPD survey, public sector organisations lose an average of 5.8% of staff per year due to voluntary turnover. Take 5.8% of the 5.7 million public sector workers (without the nationalised banks) and you get 330,000 leavers, pretty much the same figure as in John Redwood’s calculation. The trouble is, many of the people who leave public sector organisations go to other public sector organisations. If these job opportunities dry up, as they will with the recruitment freeze, expect a lot of those people who would have left to stay put, or to hang on for generous redundancy payouts.

But, even if John Redwood is right, and 300,000 people do decide to quit the public sector every year, redeploying those who are left into the vacant jobs will be a logistical nightmare. Sure the maths might add up – you have to lose 600,000 jobs so if 600,000 people leave of their own free will you’re OK – but, for all practical purposes, a public sector-wide redeployment scheme would be a non-starter. Only someone who has never tried to re-deploy large numbers of people would suggest that it was easy.

Public and private sector organisations have enough trouble trying to re-deploy staff within their own workforces. The people who are made redundant rarely seem to have the right skills to be slotted into new jobs and they are almost never in the right place. I know that, in theory, it is jobs that are made redundant and not people but it often works out that people in redundant jobs have redundant skills. It might not be PC to say it but they often have redundant attitudes too. 

For this reason, most private sector organisations have long since stopped trying to redeploy people and choose instead to give them large amounts of money to leave. On paper, it makes commercial sense to avoid both redundancy payments and recruitment costs by re-deploying people. In reality, though, it doesn’t work like that. If it did, the private sector would go to great lengths to redeploy people, but it doesn’t. Paying off the people you want to get rid of and recruiting new ones looks inefficient but it is the quickest way to exchange old skills and attitudes for new ones.

If a public sector only 75% of its current size is to maintain anything like the level of public services we have been used to, it will have to undergo a major re-organisation and a complete re-think of how these services are delivered. Some people won’t be up for the change. A few will even obstruct it. Believe me, even with the generous public sector redundancy terms, it will be cheaper in the long-run to pay them off than to try to re-deploy them into jobs they don’t want in organisations they no longer recognise.

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3 Responses to There will be redundancies and they will be expensive

  1. Pingback: There will be redundancies and they will be expensive - Rick - Member Blogs - HR Blogs - HR Space from Personnel Today and Xpert HR

  2. I think you make a very good point about the near-impossibility of redeploying people to different roles to avoid redundancies and hiring.

    But I notice here you say “many of the people who leave public sector organisations go to other public sector organisations”, but quite recently you said “There is no such thing as the public sector labour market. There’s just the labour market.”

  3. Rick says:

    Theo – I don’t see those two statements as exclusive. A lot of people move within the public sector but enough don’t, especially at management level, for the private sector to extert an upward pull on salaries.

    BTW – I saw Henry IV at the Globe yesterday too. Bloody brilliant!

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