· 4 min read · Features

What does the Comprehensive Spending Review mean for HR?

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It has been a difficult year for managers so far. Not only have business leaders had to adjust to a coalition Government, but organisations continue to face redundancies, recruitment freezes and dwindling morale. On top of this, last week's Comprehensive Spending Review marked one of the biggest shake-ups that the UK public sector has seen in recent times.

Responsible for widespread speculation and anxiety, the spending review has been seen as a necessary evil since it was announced back in May. In fact, research undertaken by the Chartered Management Institute (CMI) in the run-up to the chancellor’s announcement revealed that 76% of managers viewed the spending review as a threat.

We are now entering a period of change that will last for at least the next four years. It is true that the road ahead will be hard, but, if the right steps are taken, the UK economy should arrive on smoother ground ready for growth to begin. What matters now is that organisations, and their HR teams, heed the changes and prepare themselves adequately for the challenges ahead.

So what exactly does the spending review mean for the HR profession? It is a difficult task to cover every aspect of Osborne’s announcement, so I’ve highlighted some of the key areas that will need careful consideration by those working in human resources over the coming months.

Within the public sector in particular, the challenges that widespread redundancies will pose for HR professionals are considerable. Initial figures put the number of public-sector redundancies at 490,000 over a four-year period and it’s reasonable to assume that almost all public-sector organisations and a great many private-sector ones too, will feel their impact.

For individuals working within HR, now is the time to brush up on redundancy processes and policies. Those being made redundant will need support, as will their colleagues who are left behind. Motivation will undoubtedly suffer as a result of both losing colleagues and facing an increased workload to compensate for a reduction in manpower. The challenge is two-fold: being able to provide personal and practical support to those affected is paramount, as is being fully up to speed with the legal requirements, which have to be followed. CMI is taking steps to offer support to managers dealing with redundancy, and those individuals at risk, and is providing a special redundancy support service. 

Brushing up on policy and procedure will be the required response for HR professionals to other aspects of the spending review too.

The Government’s decision to increase the state retirement age to 66 for both men and women is significant in that it will have an effect on how employers support older workers.  HR managers need to be prepared for the fact that older staff are likely to have different requirements from their younger counterparts. We have known for some time that the changing age profile of the UK workforce would necessitate a response from employers and organisations, and the raising of the state retirement age is a small part of this. Unfortunately, CMI’s recent Managing an Ageing Workforce report reveals that only 14% of managers consider their organisations well placed to cater for older workers.

Action is needed to identify the needs of workers in the 60-plus age bracket and take steps to make organisations more accommodating. Tailoring training to the individual needs of older workers and introducing flexible working solutions to enable older staff to achieve a balance between their working and personal lives are just two key considerations.

In fact, the personal lives of UK workers, and the pressures that the spending review places on them, is something that HR managers need to be more aware of than ever before. Just as the chancellor’s review will impact on the business environment, it also has far-reaching consequences for the people’s home and family life.

Changes to childcare benefits – which could see middle class families worse off by as much as £10,000 – increase the pressure on working parents in particular. New restrictions, particularly for lone parents, on claiming income support will necessitate a return to work for many stay-at-home mums and dads. That said, while for some the impetus will be return to work, the change to childcare payments through the working tax credit mean that others will be prohibited from doing so. At the moment, 80% of childcare is claimable under the child element of the work tax credit. However, this is now to be cut to 70%. Working mums in particular may face the situation where covering the cost of childcare means it is too expensive to return to work.

While it should be seen as a positive move for the UK economy that more people are being encouraged back into work, organisations wanting to recruit from this talent pool will need to find ways to support this group of people in particular. Measures, such as flexible working, on-site childcare provision and a greater awareness of the emotional demands placed on working families, are all key considerations for the HR professional at this time.

A certain red-top dubbed the spending review the ‘Tory war on women’ and the ‘worst attack on women in the history of the welfare state’. It’s reasonable to assume that female workers in particular will be feeling the strain, especially financially. The HR world needs to do much more to support female staff and address significant issues such as the gender pay gap that still persists. Indeed, CMI research revealed that the wait for equal pay could be as long as 55 years if the rate at which female salaries are increasing remains unchanged.

If this trend continues, it won’t just be women who lose out, but organisations too. Employers who fail to address the issue of unequal pay risk losing talented employees, and a talent shortage will prove detrimental both to the UK’s economic recovery and future business performance. HR managers need to recognise the severity of the problem and challenge inequality at every opportunity.

Tough times then and, to quote the chancellor, ‘it’s a hard road ahead’. It is understandable that the spending review has caused considerable anxiety and will have a big impact on so many aspects of the working environment. If the right steps are taken, however, the spending review should mark the beginning of a return to growth. HR managers have a major role to play in ensuring that workers are supported through the tough times. By being as up to speed as possible with the potential ramifications of the spending review, the distance we need to travel on the hard road, before things get better, should grow shorter and shorter.

Ruth Spellman is chief executive, Chartered Institute of Management