Councils using range of measures to avoid redundancies, but further job losses loom

Local authorities have implemented a range of measures in a bid to avoid having to make redundancies, a joint report by the Local Government Association and the Audit Commission has said.

But the report warned that further job losses were unavoidable and compulsory redundancies were likely to rise in future years.

Popular measures implemented by local authorities so far have included:

• reducing spend on agency workers and consultants
• cutting overtime, bonuses and out-of-hours payments
• freezing recruitment to unfilled posts
• freezing pay
• extending part-time working.

The report – Work in progress: meeting local needs with lower workforce costs – found that the vast majority of councils (90%) had also reduced the costs of higher paid staff by employing fewer of them or paying them less.

It argued that redundancies had been “inevitable given the sheer scale of budget cuts that councils have been hit with”.

The report also warned that further job losses were unavoidable “as part of a cost-cutting mix likely to include organisational change, sharing services and outsourcing”.

An estimated 145,000 jobs have been lost in the sector in the past year. The Office for Budget Responsibility meanwhile predicted recently that the overall number of government jobs lost would rise to 710,000 by 2017.

The report acknowledged that councils would make their own choices about their workforces in response to the falls in income. “These choices should fit their local circumstances and objectives, and will involve detailed negotiations with trade unions and engagement with the workforce,” it said.

The LGA and the Audit Commission report makes a number of recommendations intended to address short- and longer-term measures. The two organisations said these would help councils "achieve the best possible outcomes, without impairing their local discretion".

The report said councils should act quickly to:

• decide on the most effective and equitable approach to reducing staff numbers (such as the mix of voluntary and compulsory redundancies), while protecting capacity to meet community and service users’ needs
• assess the costs and benefits of retraining, redeploying, and sharing staff, against those of making staff redundant, and
• complete any redundancy programmes, with due regard to legal duties and affordability.

It also suggested that other immediate savings would come from a review of existing organisational practices. In this respect councils should:

• set clear corporate rules for savings in, and control over: overtime, bonus payments and honoraria; and agency workers and consultants
• use the most cost-effective mechanisms for employing agency staff and contracted professional staff
• make savings by freezing recruitment to all vacant posts not needed to deliver frontline services or manage organisational risks, and remove non-essential posts from the organisation
• carry out a full review of local reward strategies
• review and reduce the scope for qualification for essential car-user allowances, and
• review mileage rates as part of a more strategic, sustainable approach to on-the-job travel.

The LGA and the Audit Commission also recommended that councils should, “over the next year”:

• integrate workforce data across departments to improve the quality of corporate decision making about the workforce
• assess how to reward staff equitably for their performance and contribution to organisational objectives
• benchmark pay rates with public, private and voluntary organisations in similar labour markets, to understand how their own rates compare
• use a range of data, including the Commission’s Value For Money (VFM) Profiles, to understand their relative spend on staff costs
• use a total rewards approach (pay, pensions, flexible working, and other benefits) to attract prospective, and keep existing, employees, and
• reduce reliance on overtime and spot contracts by negotiating a more flexible approach to hours and pay.

Over the same period, councils should also:

• review the full range and scale of services they can offer alone and in partnership with others, including neighbouring authorities who provide similar services, withdrawing or sharing some services where necessary to protect others
• complete departmental and service reviews to assess how best to meet community needs with fewer resources
• use those reviews to decide on future workforce numbers, skills and configuration, and
• review current organisational structures to create leaner, flatter structures with increased spans of management control.

Sir Merrick Cockell, Chairman of the LGA, said:
"Funding cuts have meant workforce costs must come down. Councils have been ahead of the game in making savings and have already started to reduce workforce costs.

“Unfortunately, job losses are inevitable given the scale of cuts. Where these are necessary, councils are working hard to minimise disruption to staff and services through restructuring, shared services and outsourcing. They are also looking at how they invest in and reward people to ensure they continue to deliver the most efficient public services possible."

Audit Commission Chairman Michael O'Higgins said each council had to find its own way of cutting costs “tailored to local needs, local circumstances and its own workforce”.

He warned: “Councils are often the largest employer in their area, so downsizing can affect the local economy. Local government is a people business, with staff costs accounting for almost half the money spent by councils, so they need to be aware of all their options and the tools at their disposal.”

The Work in progress report can be downloaded here.  Its contents include: an agency workers expenditure tool; a workforce expenditure tool; five case studies on the different approaches councils are taking; a guide to pay benchmarking; and information on a labour market nearest neighbour methodology.

Philip Hoult