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More than a fifth (22%) of organisations expect to make some redundancies over the next three months, but the picture would be a lot bleaker without the option to put staff on furlough, according to the latest quarterly Labour Market Outlook report from the CIPD and the Adecco Group. 

The report found that employers making use of the Government’s Job Retention Scheme said that they would, on average, have made 35% of their workforce redundant if it weren’t for the Job Retention Scheme.

The survey also shows that more than half of private sector firms are preparing to freeze pay over the next 12 months, while employer hiring intentions have fallen to their lowest levels since the survey began in 2005. 

The report’s net employment balance, which measures the difference between the proportion of employers who expect to increase staff levels and those who expect to decrease staff levels, has dropped 25 points from 21 to -4.

“While hiring and pay prospects have taken a significant turn for the worse, employers have so far held off from making large-scale job cuts,” said Gerwyn Davies, CIPD Senior Policy Adviser for the CIPD.

“The Government’s Job Retention Scheme is undoubtedly a key factor, but many employers have also succeeded in achieving a step change in homeworking which, along with other steps to reduce costs, has avoided the need for large-scale redundancies.

“We are pleased that the Government has heard consistent calls from the CIPD to extend the job retention scheme and make it more flexible at the same time. The next challenge will be for Government to work with employers to design the best way to enable furloughed staff to work part-time for their employer, and gradually reduce reliance on the wage subsidy before the scheme ends in October,” he continued. 

Hiring intentions have fallen to their lowest levels since the survey began in 2005. Just two in five (40%) of employers are planning to recruit in the three months to July 2020, compared to 66% in Winter 2019/20. Median basic pay expectations overall are for a 1% increase, down from a 2% increase last quarter. 

Basic pay increase expectations in the private sector are zero, compared with 2% three months ago. Meanwhile, pay increase expectations remain unchanged in the public sector (1.5%) and voluntary sector (2%).

Davies said: “The state of the economy will have a big impact on earnings in the next 12 months. Employees should brace themselves for pay freezes or even pay cuts in the year ahead to help preserve jobs.”

The latest Labour Market Outlook also asked employers about their response to the current crisis and use of the Government’s Job Retention Scheme with popular employer responses to the current crisis include extending homeworking significantly across the organisation (61%), recruitment freezes (44%), freezing or delaying planned pay increases (33%), introducing new flexible working arrangements (32%), cutting bonuses (29%) and cutting training budgets (27%).

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