SME dismissals: Most UK small firms have no employee offboarding plan

With high inflation gripping the UK well into 2023, the human resources (HR) departments of small to midsize enterprises (SMEs) may have tough decisions to make to respond to lower revenues and rising costs. GetApp investigated the strategies currently used for employee offboarding to learn more about how SMEs prep for potential staff losses.  

Job losses, either by redundancies or staff turnover, can be tough on a business, especially in smaller firms where vital skills gaps can emerge. However, regardless of why employees leave, it is essential to have a plan in place, especially when cuts do become necessary, to manage the process of employees leaving the firm smoothly.

Offboarding is a way that human resources teams in small companies can gain better control over any job losses that might be necessary. This allows firms to optimise HR tools and processes to avoid essential knowledge gaps emerging in their organisation and to gather vital employee feedback no matter why staff members leave. 

GetApp surveyed 1,029 SME employees from the United Kingdom aged between 18 and 65 years old who had worked for at least one year in their current company to investigate how firms currently manage this process. In doing so, we hoped to learn more about how employee exits are currently accomplished in the UK and what local businesses can learn to improve their approaches to this task. 

Job cuts in the UK: Londoners report the highest layoffs

Job cuts are a lingering threat of a cost of living crisis and need to be handled carefully. This is for two reasons: firstly, to avoid damaging a company’s reputation and secondly, to prevent a decrease in workplace morale amongst remaining employees. 

Before looking at how firms handle offboarding, we first asked participants if they had observed any recent job losses in their companies. Are significant job cuts a reality for UK SME employees? 

Most participants across the country had not seen a cut in staff, at least in their own companies, over the last 12 months. Just over a quarter (28%) reported redundancies (for context: the national redundancy rate is 3.3 per 1,000 employees). However, this was particularly high in London, which was 9 percentage points higher compared to our overall national percentage.

UK layoffs seem to be increasing amongst the SME employees who observed workplace redundancies in the last year. 47% of this sample of workers noted a rise in the rate of workplace job cuts. According to most (44%), layoffs have increased by 10-20% in the last 12 months. However, once again, these numbers were significantly higher in London, where 53% of local respondents had observed layoffs increase by 10-20% in the last year.

Whilst many smaller firms are making layoffs in the UK, according to our sample, it is clear from the findings that employment consistency is holding with most UK SMEs. This is a positive sign that small companies remain stable for now and are holding off from job cuts unless necessary. 

Consistency in staffing is a key factor in safeguarding talent management. Redundancies can also affect the workers who remain on the payroll, as morale can take a dive in these circumstances. Even the employees that owners and managers may want to keep could leave anyway due to factors such as burnout and anxiety about job security. Not to mention the costs associated if exiting employees must be rehired later or new employees need to be recruited. 

Cost cuts are the main culprits for job losses

We already know that some job losses are occurring nationwide, but what is their cause? Naturally, there are a few reasons companies might make redundancies, such as low consumer demand, poor cash flow, production problems, or a merger between businesses.

To look at why the layoffs are happening, we asked participants who had observed cuts in their firms for the reasons they had been given for the redundancies internally. The results can be seen below.

Somewhat predictably, the lion’s share of job losses was due to companies scaling back spending, most likely due to higher production costs and lower revenues. Naturally, we expected to see these core reasons being the motive for companies to scale back on their workforce, and it wasn’t a shock to see cost-cutting as the primary cause in most cases. 

However, just over a quarter of job cuts (28%) were due to lower operational output. At a national level, data shows that production output in the UK in late 2022 dropped 1.4%, which also underscores the operational pressures that many companies are under in the current climate.

The picture we’re seeing isn’t very far from the norm, companies often have to make reassessments in their workforces, and the redundancies observed in our sample are in the lower percentiles. However, it’s worth considering that longer term, this picture could change if UK businesses continue to get squeezed financially. However, that will depend very much on how the economic situation develops. Nevertheless, planning for this event is key.

Most firms shy away from communicating layoffs

The decision to make cuts to a small business’s workforce is tricky. However, an even thornier decision is how to make the news known to the remaining staff.

We explored how SMEs inform staff of job cuts with our participants. We hoped this would give us a clearer understanding of how companies currently inform their teams about any redundancies that take place. What we found was a mixed picture.

The largest single group (43%) of our total sample said that their companies communicate the news of job losses amongst staff. However, a higher percentage (57%) said they were not informed when this happened or were not aware.

Trust among employees is essential to company culture, so transparency counts when big changes occur. If staff learn of job losses via rumour, this will likely lead to more stress and possibly job dissatisfaction. However, considering the delicacy of this matter, that news should be broken carefully.

We investigated how companies are going about this by querying the participants who had answered yes when asked if their firm informs its entire workforce of redundancies. From this, we observed a mixed range of communication methods:

• Managers personally informing their direct reports (64%)
• Generic emails making the announcements (23%)
• Company-wide announcements via town halls/meetings (8%)
• Newsletters (4%)
• Other (1%)

The findings indicate that most of these companies take a direct and personal approach to communicating layoffs. Our findings see that the vast majority (72%) of companies that announce their layoffs company-wide share the news in a direct meeting (either remotely or face-to-face).

Of course, internal communication software such as emails or instant messaging can be utilised to quickly and cleanly announce the process is happening, who is affected and the following steps. This explains why it remained a popular option for around a quarter of this sample. However, what is clear from the data is that some direct face-to-face time is needed.   

London SMEs lead the way with offboarding strategies

Departing staff members are an inevitable part of running a business, as unfortunate as it may be. For this reason, planning to make that experience as smooth as possible for the company and the departing employees is vital. A good method to approach this is an employee offboarding process strategy.

Having a well-defined employee offboarding process is beneficial for many reasons. Not least, it makes the sometimes emotionally charged procedure of losing staff more straightforward and clear for both the company and the exiting employee. It also can assist by ensuring that the staff member’s knowledge of company processes and procedures is retained within the firm and guarantees that sensitive information handled within the organisation is kept secure.

To what extent have UK SMEs implemented offboarding strategies? We asked our survey sample to find out.

In total, we observed little evidence that employee offboarding is widely used nationally. Only a quarter of our UK sample said that these procedures were definitely in place. However, London proved an outlier again, with over a third (37%) of London-based respondents reporting that their companies used these practices.

No other part of the UK matched the overall national average, suggesting that many SMEs don’t have a clear offboarding strategy. This is something company leaders need to address to make sure they are prepared to properly handle employee exits from their company, even under the best circumstances when someone leaves voluntarily.

Offboarding procedures come in many shapes and sizes 

There are many ways that employee offboarding could be tackled, from providing exit interviews to creating a knowledge transfer plan. To dive deeper into what employee offboarding best practices are used currently, we asked participants whose companies had implemented offboarding what processes were in place.

An exit interview proved to be common when employees were made redundant. Three-quarters (75%) of participants in this group said this was currently used by their employer.

How are businesses managing knowledge retention and feedback?

It was also common for companies with offboarding procedures to arrange knowledge transfer processes with departing employees. In most cases (46%), departing workers formally met with the team member who would take on their responsibilities to explain their tasks. 

Additionally, employees indicated the following trends: 

• 32% of respondents said exiting staff members were asked to write down their responsibilities and tasks for fellow employees
• 15% set guidelines for each position so new employees could settle in
• 6% of companies didn’t follow a knowledge transfer process 
• 2% of respondents were unaware of such a procedure at work

However, it is worth reflecting that employee exits give companies a great chance to survey their workforce for valuable feedback. Employees leave companies for many reasons, good and bad, and giving departing staff members a chance to report on their employee experience can prove crucial for identifying those trends.

We found from our sample that, in most cases, companies that use offboarding strategies, at the very least, offer chances for employees to give feedback. However, they sometimes would only offer this in certain situations.

Offboarding plans offer benefits for employers and employees

These are economically turbulent times and as a result there is a small but significant amount of job cuts happening in the UK SME market. Therefore the subject of how to procedurally handle employee exits is vitally important.

However, we did observe that most companies lack an employee offboarding plan, and that is something that businesses should pay urgent attention to. Offboarding, as we saw, can prove highly useful for helping retain knowledge within an organisation and can give leaders in management and HR a better view of employees’ experience inside their firm, not to mention help reassure staff who survive the cuts.

There is clearly much that can be done to facilitate smoother and better employee exit experiences and many technological solutions exist to simplify this. In our second report, we will look at how artificial intelligence (AI) is currently being used in employee offboarding. We’ll also investigate what staff members in our sample think about AI’s use in HR decision-making.