Monday, February 09, 2009

Investing in People first and last

Small business owners are doing everything they can to avoid making people redundant as a strategy for surviving the recession, an independent study claims.

Cutting overheads, increasing sales, developing new products and refocusing on a core activity are all bigger priorities than cutting staff, according to the survey of 500 small business owners by Continental Research.

George Hadley, managing director of Direct Access Systems, a specialist consultancy employing 30 people, is among those who believe redundancy should only be tried when all other options have been exhausted.

His business, which has no debt and turns over £1.3m a year, has been hit by clients delaying project start dates and dragging their feet on settling bills.

Mr Hadley, who owns 85 per cent of the business, notes that recently he has been putting his own money into the company to ensure that he does not have to cut his workforce.

"I have done everything within my power to make sure we don't lose people," he said, adding that removing jobs would be a false economy given that he will need the manpower for contracts that have been won but are yet to start.

In spite of the aversion to job cuts, one in 10 of those asked by Continental Research said they were planning to make some staff redundant as a result of the economic downturn. The larger the company, the more likely it was to support job cuts. Companies employing fewer than 25 people tended to favour a reduction in working hours rather than cuts in staff numbers.

Small business groups have reported a sharp increase in calls to their legal advice lines about the rules governing redundancy. Such issues made up more than one in five calls received by the Forum of Private Business's member helpline in January.

Vince Caldicott recently cut four of the 43 jobs at his Hampshire-based business, Premier Contract Supplies, which provides bathrooms to builders and decorators.

However, he claims that he has felt unable to cut as many jobs as he would have liked because of the fear of breaking employment laws.

"I do need to make more people redundant, but I don't know how to do it," he said.

Stephen Alambritis, spokesman for the Federation of Small Businesses (FSB), said his organisation had also seen a rise in inquiries about redundancy, but stressed that most companies were making sure they were aware of the rules rather than planning job cuts. "The last thing they would think about is redundancies," he said, adding that job losses from small businesses only tend to come when they file for bankruptcy.

The Chartered Institute of Personnel and Development has forecast that 600,000 people will lose their jobs in the UK this year. However, the FSB claims that only a quarter of these redundancies will come from businesses employing fewer than 250 people even though these companies account for 99.9 per cent of the UK's 4.7m businesses.