More companies consider staff layoffs as economic crisis bites

More companies consider staff layoffs as economic crisis bites
Worker at a fair booth for the construction fair. The construction sector has been particularly badly hit by increasing energy and raw material prices. Credit: Dirk Waem/ Belga

Rising energy and raw material prices are weighing heavily on Belgian companies, with rising labour costs due to wage indexation further aggravating the situation. This is resulting in more and more companies considering laying people off.

A previous survey among Belgian SMEs in September already highlighted that they are finding themselves in a strenuous position, with one in six considering staff layoffs to save costs. A more recent probe found four in ten employers say they intend to let people go to cut costs.

"Whether these intentions will translate into actual layoffs will have to be seen in the coming months. Possibly entrepreneurs are waiting to see how the economic situation will evolve further," Bernd Carette, Senior Manager at HR services provider Liantis Consult, said.

Among employers who say they worry about the future of their business on a daily basis, this figure was as high as 47.6%, while among employers who say they are literally lying awake because of the rising costs of their business, it was 49.1%.

The survey highlighted that the majority (86.4%) expect the average cost per employee to rise up to 30% because of energy prices, fuel prices and wage indexation, Belgium's system that sees workers’ wages automatically increase in line with inflation.

For many companies, this is a heavy burden that comes on top of the increase in other costs, while it has spurred concerns that this will negatively impact the competitiveness of Belgian companies in certain sectors. However, unions have stressed that wage indexation is now more vital than ever, and have repeatedly taken to the streets and organised strikes to protect its existence.

Increased costs vs. increased needs

Carette stressed that there are other interventions that some employers can implement besides firing staff, such as invoking the temporary unemployment scheme, which allows companies to let go of their staff on the condition that energy accounts for more than 3% of production costs.

Meanwhile, there is a striking contradiction that one in four companies are also indicating that they are urgently in need of more employees to get all their work done. In June, the number of vacancies in Belgium, which has been growing steadily since 2013, reached its highest point on record, and the figure has not declined in recent months.

This contradiction is not surprising, said Carette. "We see that the crisis and the costs that are soaring are causing employers to take a critical look at their workforce." This includes evaluating whether a two-person job can be done by just one employee.

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"But on the other hand, you see that this is unrelated to certain key positions that are difficult to fill due to the current war for talent. Those key positions are so crucial that you cannot just cut them," he added. These profiles, from IT workers to technical managers and healthcare experts are currently enormously challenging to find.

Carette warned that this is another reason why employers should be wary of simply letting people go for purely economic reasons. "Job insecurity may grow among others in your company, which can cause employees you wish to retain to leave of their own accord."


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