One-third of UK organisations may lay off staff

The UK has among Europe’s highest proportion of businesses that are considering laying off staff this year despite stable increases to salary budgets, according to research by HR consultancy Aon Hewitt.

Thirty-five per cent of the UK organisations that responded to the Aon Hewitt 2013 Salary Increase Survey – Winter Update, said they would either consider (23%) or implement (12%) staff lay-offs this year.

Of those organisations, 62% were in service-based industries, with financial services (24%) and the hospitality, leisure and travel (24%) sectors most affected.

“This high-potential figure for redundancies may stem in part from UK organisations feeling that they continually have to adapt and reorganise to remain competitive in what is still a volatile economic environment,” said Andrew Macleod, leader of Aon Hewitt's pay research practice in the UK. 

Only Estonia (50%) and economically troubled Greece (45%) had a higher proportion of businesses with lay-off plans, according to the survey, which received responses from 395 organisations in 44 countries.

In Europe’s largest economy, Germany, 31% of businesses are considering staff reductions and in the third major economy, France, it was 23%.

The freeze continues

In the UK, there has been an increase in the number of organisations considering pay freezes.

This year, 13.5% of organisations said they would freeze pay, up from 7% in 2012. In Greece, whose economy is predicted to contract by 4% this year, 58% of businesses said they would freeze pay. Other countries where pay freezes are prevalent include Ukraine (indicated by 20% of organisations), Portugal (19%) and Switzerland (18%).

The highest concentration of pay freezes are expected in the construction and engineering industries, the survey indicated.

Recruitment activity up

Almost a third of UK organisations expect recruitment activity to increase this year and only 6% are planning a hiring freeze. This is lower than most markets across Western Europe and the lowest UK figure reported since the beginning of the global economic downturn.

Organisations are still increasing overall salary budgets by about 3%, which is at about the same level as 2012.

“We are seeing some mixed messages, and some of them may offer good news to come. The survey findings suggest that the impact of the overall economy will not be as deep as the headline figure on redundancies might indicate,” Macleod said.

“Ninety-four per cent of organisations said that they expect to increase their wage bill or at the very least maintain current spend. Organisations seem to be increasingly aware that they have to ensure that their best people are paid well and get decent salary increases – even if they have to freeze pay generally for their staff.”