Redundancy impact is underestimated.

Toni Vicars

By Toni Vicars

December 8, 2020

While redundancy and layoffs have become commonplace, the real impact of this short term solution has often gone unheeded.

Many executives are unaware of the significant implications for the future of their organisation and the people involved. Bain research revealed that redundancy proved to be the most damaging kind of workplace change as it undermines morale, confidence, trust and comfort of staff.

  • Companies that have layoffs are twice as likely to file for bankruptcy as companies that don’t have them.
  • 74% say their productivity has dropped since a layoff and 61% have less confidence in their company’s future.
  • For those left, they experience on average a 36% decline in organisational commitment and a 20% decline in job performance.

However, what is really surprising and usually never addressed are the more silent impacts of redundancy, the emotional impact on those who have left. The figures from a broad range of research are startling, even impacting hard-won gains in diversity.

For those departing:

redundancy increases risk of illness
  • 20 years later, employees from the 1982 recession are still earning 20% less than those who kept their jobs.
  • Kate Strully’s study also showed that those who were made redundant were also 6x more likely to commit a violent act.
  • Losing your job ranks among the ten most stressful life events on the Holmes-Rahe Stress Inventory, a scale used to estimate people’s vulnerability to major health breakdowns. 83% of those made redundant have an increased risk of a new health condition.
  • Being laid off can have a lasting impact on an individual’s self-confidence for years to come. New findings of social scientist James Laurence shows that the large-scale job losses of the recent recession could lead to a worrying level of long-term distrust and risks having a detrimental effect on the fabric of society.

As the crisis continues, by economic statistics, the fall out of Covid19 is impacting working women more acutely with significant strides backwards in pay and employment equality. According to National Women’s Law Center (NWLC) in April alone, women accounted for 55% of the jobs lost with only a third of those jobs returned in May and June. To give you some perspective according to the U.S. Bureau of Labour Statistics, in the USA alone in April men’s unemployment went up from 3.55 million in February to 11 million while women’s unemployment went up from 2.7 million to 11.5 million over the same period and that pattern is unfortunately continuing. In June, the unemployment rate for women was 1.3x higher than the highest unemployment rate women faced during the Great Recession.

Unfortunately, research is also showing that Covid-19 job losses are disproportionately hitting ethnic minorities. According to campaigner Hope Not Hate, in the UK, BAME people were significantly more likely (13%) to report having had their hours reduced compared with those from a nationally representative sample (9%). They are also nearly twice as likely to report having lost their job (7% compared with 4% nationally from May and 3% from June).

In the USA, Commonwealth Fund analysis from April found that more than half of Latino and nearly half of Black survey respondents reported experiencing an economic challenge because of the pandemic — substantially more than the 21% of white respondents. Some 61% of Hispanic Americans and 44% of black Americans said in March and April that they or someone in their household had experienced a job or wage loss due to the coronavirus outbreak, compared with 38% of white adults, according to a Pew Research Center survey.

How we strategically approach redundancy and the pathways we provide departing talent can have a significant impact on diversity, the mental and physical health of the talent departing, and the impacts felt across the business.

Discover more by downloading our white paper: The Corporate Mandate to Activate Departing Talent

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