CBI reacts to job losses

07/07/2009

Workers' hours should be cut as an alternative to redundancy, in order to offset unemployment increases in the recession.

This is the view of the Confederation of British Industry (CBI), which released a report on the matter carried out in conjunction with Siemens yesterday.

The business group also said that unemployment could rise from its current level of 2.2 million to hit three million as a result of the downturn.

An 'Alternative to Redundancy' scheme would work by putting an employee out of work for a pre-set period of up to six months.

Over this time, the worker would receive double the state job seekers' allowance - with half paid by the employer and half by the government.

The CBI claimed that this would then give the employee a better chance to get new work, without facing too significant a drop in income.

John Cridland, deputy director-general of the group, said: "The alternative to redundancy scheme could save jobs by giving businesses more leeway as the economy recovers.

"We considered various forms of wage subsidy and support for short-time working, but this approach is better. Businesses will be more able to cope with sharp drops in demand and prepare for recovery, while workers benefit from improved financial support and a door that is kept open for six months."

Kevin Still, EuroDebt director, commented: "With potentially another 800,000 consumers facing either redundancy or meaningful loss of income, the debt advice sector needs to be prepared to deal with these types of schemes and explain them to creditors when a client is unable to meet their contractual obligations. In some ways redundancy is fairly straightforward to communicate to creditors, however, where there is still a regular, but reduced, income stream then this needs to be understood by the hardship teams of the creditors and their agents.

"As a Debt Management Company, EuroDebt is already seeing existing clients struggle with reductions in already stretched budgets. This requires a more pro-active approach to changes in client circumstances."

The CBI report also comes as the chancellor of the exchequer suggests that a pay freeze in the public sector could be in place within weeks.

Official figures suggest that, despite the recession, public sector pay increased by 3.6 per cent in the three months to March - while pay in the private sector has declined by 1.2 per cent.

Speaking to Sky News, Alistair Darling commented: "Public sector pay has obviously got to reflect prevailing conditions and in particular inflation has come way down."

Tags; Young Family Finances, Job loss, Credit Card Lifestyle, Recent Graduate Debt,

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