Can offsetting help SMEs avoid redundancies?

A recruitment firm offers to help SMEs avoid redundancies - by placing their staff in other firms...

Last Updated: 31 Aug 2010

In today’s dicey economic climate, many SMEs are struggling with the prospect of making their staff redundant. But recruitment firm Randstad thinks it has the answer. It’s offering small companies a staff ‘offsetting’ service: instead of laying off staff, a company can enlist the services of Randstad to find them temporary work in another local business. Their original employer takes a chunk of the proceeds, and can then take them back when business improves. Sounds good – but will it actually work in practice?

Here’s how it would work, as we understand it. A small business would continue to pay the employee’s salary and benefits, but Randstad would find the employee temporary work for an agreed period of time (which could be from one week to 10 months) with another local organisation. The original employer will get back up to 90% of what their staff member earns in their new role. So it’s basically a lot cheaper for them to keep this person on the payroll – and when things pick up, they can bring them back on board with the minimum of fuss.

There’s clearly a lot to be said for the idea, in principle. It’s good for the company, because it gives them a cheaper way to keep people in a job while avoiding the awfulness of redundancies. It’s good for the employee, because they still have a job. And it’s presumably good for Randstad, because it will boost their temporary recruitment business and provide them with some juicy fees.

On the other hand, we can think of a few practical problems that may need ironing out if this is going to catch on across the board. For one thing, it might not be easy to match the employee’s experience with a suitable temporary job (a company PA is not necessarily going to be happy taking a temporary job in a meat-packing factory, for instance). Equally, if they end up working for a rival, presumably there’d be some confidentiality issues to contend with (not to mention that the new employer would effectively be subsidising one of their competitors). And others might not like the fact that a temp-to-perm arrangement is out of the question; after spending time and resources developing new recruits for 10 months, the foster company might be reluctant to let them go.

Still, any scheme that could improve the survival chances of our all-important SME community is worth a go – particularly if it’s going to leave them better-equipped to rebuild their business once the economic storm has passed. So we’ll be watching this new Randstad initiative with interest.

In today's bulletin:

Inflation down again - as high street delivers mixed results
Banks failing to heed the lessons of Lehman
Editor's blog: The childishness of the cuts debate
Can offsetting help SMEs avoid redundancies?
Books Special: The colossal failure of Lehman Brothers

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