HR needs to prepare for further sackings in 2023

Mass redundancies at the likes of Twitter, and Amazon may have raised concerns about the fate of the jobs market, but will this continue into the new year? Sarah Ronan reports

November saw the UK’s third Chancellor of 2022 set out an emergency budget of tax rises and spending cuts designed to make the recession shallow and short. Presumably, there are some within Jeremy Hunt’s own party hoping that voters’ memories will also be short.

Following months of political turbulence, a worsening cost of living crisis and a catastrophic mini-Budget, the government was clear in its message: the recession was made in Russia, but the recovery would be made in Britain.

Meanwhile, jobs are being slashed across the globe. 

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The tech sector may be grabbing headlines with big layoffs at Meta, Twitter and Stripe, but other industries have also been hit.
Retailers Joules, and behemoth Amazon have also announced plans to downsize their workforces.

It’s tempting to link these job losses solely with the recession – but is it that straightforward? 

Silicon Valley has been seen as somewhat of a bellwether in recent months and has made many onlookers cautious about what’s in store for all of us.

Heavily reliant on advertising revenue, it was inevitable that the tech sector would feel the impact of businesses cutting back. But according to Tim Grimes, co-founder of Work Your Way, it has been the sector’s focus on hypergrowth that has made it particularly vulnerable to macroeconomic factors.

“What has intensified the economic [impact] has been the aggressive pandemic hiring practices we’ve seen in tech over the last two years,” says Grimes. “Many grew too large and too fast in an unsustainable way, misjudging how long the pandemic would be. 

“A lot of tech organisations are, I think, recalibrating for the future.”

But the same isn’t necessarily true for the other sectors now also experiencing redundancies. 

Jon Boys, economist at the CIPD, says that the impact of the recession might not be felt in the labour market immediately, and 2023 could feel a lot like 2022 for some time to come.

“The Bank of England expects unemployment to increase from its current low of 3.6% to around 6.5% by 2025,” says Boys.

“Natural churn and hiring freezes contribute to some of this but redundancies will happen too.”

However, he doesn’t believe this to be a correction of hiring practices.

“When the economy reopened, demand for goods and services returned and so did demand for the staff to produce them. Employers have acted rationally in trying to achieve a workforce of sufficient size, and when that demand ebbs it will be reasonable to reduce labour, ideally looking to redundancy as a last resort,” he adds.

Despite such a bleak outlook, it might still feel counter-intuitive to be talking about redundancies in the same year that employers have been struggling to fill 1.3 million vacancies.

“It is contradictory, but it is not surprising,” says Gemma Dale, co-founder of The Work Consultancy and senior lecturer at Liverpool John Moores University.

“There will be industries that will thrive during difficult times, there are others that will not. This contradiction can even happen within a single organisation – some employees may be redundant while other departments are finding it difficult to recruit.”

Despite the economic uncertainty, it is the difficulty in recruiting that is still the main concern for most employers, according to Kate Shoesmith, deputy CEO of the REC.

“Now, hiring is not at the levels we’ve seen before, but that is in no way a sign of distress. To us that feels like something to be expected.” 

The REC’s latest Report on Jobs found that permanent vacancies have declined for the first time since February 2021. Temporary placements have stagnated and starting salary inflation is at an 18-month low.

“In 2021, there was this mad rush to recruit as businesses were dealing with pent up demand,” says Shoesmith. “Now, hiring is not at the levels we’ve seen before, but that is in no way a sign of distress. To us that feels like something to be expected.” 

Shoesmith points out that the high-profile redundancies we are seeing in the headlines do not stack up with the reality for many businesses.

“When we talk to recruiters, they’re saying that there is still a huge demand for staff and that it’s particularly difficult to fill
skilled roles in key sectors,” comments Shoesmith.

“It’s maybe not the same rush to fill those roles as it was post lockdown, but there is a real feeling that talk of mass lay-offs is overblown.” 

The REC’s Jobs Outlook for the third quarter of 2022 bears this out with employers saying they were more likely to hire in the short and medium term than they were to let staff go. 

Too often, in times like these, HR is seen as the messenger of bad news, instead of the strategic partner that it really is.

“It becomes more important than ever for HR teams to look externally, monitoring trends and keeping up to date with the industry, talent market and economic forecasts,” says Dale.

“They should also engage closely internally with finance teams so that they are aware in advance of any potential challenges the business is forecasting.” 

Laura Evans, CEO of Glass Ceilings Change Management, agrees: “Far from bracing itself for more to come, HR professionals should be on the front foot in driving forwards the change and innovation – in how and where people work, technology, employee engagement, wellbeing, and the environment – that are so badly needed for businesses to survive.”

This will inevitably mean a robust approach to workforce planning and talent management, something that’s not always easy in uncertain times.

“Downturns affect different industries and businesses differently,” says Boys. “It may be a boon to budget retailers, for example. And businesses without strong balance sheets and less debt may have an advantage in the era of higher interest rates.

"Long term workforce planning can solve problems down the line. You don’t want to have big gaps in your talent pipeline in the future.”

Indeed, the consequences of decisions made in the first lockdown have come back to bite some employers. Organisations that availed of furlough were able to bounce back and meet demand quicker than those who had made large-scale job cuts. 

The pandemic lessons are plentiful, but Shoesmith is quick to recall one of the most important: “If we’ve learned [anything] from the pandemic, it’s that if you don’t put the people stuff first, if you don’t get that right, then you will not be able to see it out or sustain your business until the good times come back.”


The full article of the above first appeared in the November/December 2022 print issue. Subscribe today to have all our latest articles delivered right to your desk.