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Charities get ready to lay off staff amid fears for funding

By Andy Ricketts, Third Sector, 2 May 2007

Charities are amending staff contracts to offer less favourable redundancy terms to new employees in order to protect themselves from the effects of anticipated funding cuts.

The financial uncertainty caused by Chancellor Gordon Brown's announcement in this year's Budget that the Comprehensive Spending Review would be delayed until the autumn has forced charities to act.

Some organisations have cut back redundancy notice periods from three months to one. Others have reduced redundancy payments to the statutory minimum.

They fear that by the time spending decisions filter down to front-line organisations they could be left with just weeks to shed staff if funding is reduced or contracts lost.

Jenny Edwards, chief executive of Homeless Link, said the charity had cut the redundancy notice terms it gave new staff to one month.

She said the delayed spending review could leave organisations having to issue precautionary redundancy notices to staff in case they had to reduce their workforces.

"You need to make sure you can change your size in line with your funding," she said.

"We don't think it's a good idea, because you want to offer reasonable working conditions, but if you do not take defensive steps you could end up bankrupting your organisation if a big funding payment falls through."

Nick Aldridge, director of strategy at Acevo, said he expected the review of redundancy terms to be "a widespread phenomenon".

The chief executives body is contacting members to assess the situation.

Aldridge said that because public sector funders would be making financial decisions at a later stage, charities needed to be able to respond quickly.

Emma Burrows, partner and head of the employment group at law firm Trowers and Hamlins, said: "A lot of charities are looking to pare down their employment contracts quite dramatically in terms of giving them more flexibility with staff."

Many organisations had already changed their redundancy terms so that they met only the statutory obligations, she added.