Are the Aviva job cuts selfish given the economic climate?

It’s no wonder that insurance giant Aviva has attracted negative press lately. Its decision to cut 600 back-office processing jobs and relocate them from the UK to India by the end of 2014 would have been controversial even if the economy was sound. But with the UK’s unemployment rate hovering around 2.5 million, are the Aviva job cuts an outright betrayal of its British workers?

The company would argue, however, that it needs to become leaner – and meaner – in order to carry it through these tough economic times. So, has Aviva betrayed its workers or simply gone into survival mode?

 

Can offshore relocations be justified?

The relocation will hit staff badly in Norwich, York and Sheffield, but will presumably benefit job-seekers in Pune, India. However, that doesn’t impress observers here at home.

The UK’s biggest union, Unite, wasted no time in slamming the insurer’s decision. In a statement, national officer Dominic Hook announced: “Aviva has a responsibility to the communities it benefits from. It’s bad enough exporting jobs overseas when the economy’s strong, but when Britain’s economy is suffering it’s outrageous that the insurer isn’t supporting employment in the UK.”

Arguably, Aviva is merely adapting the same strategy as other major British financial sector employers during the downturn. This year alone, banks such as RBS, HSBC, Barclays and Lloyds have announced plans to slash around 6,900 jobs and many British companies have also outsourced departments to Asia, where pay and overheads are lower.

Certainly, Aviva’s shareholders have been clamouring for remedial action. The new chief executive Mark Wilson took over at the beginning of the year after a shareholder revolt ousted his predecessor Andrew Moss. The company had been forced to axe 2,500 jobs in 2012 to make savings of £275m, having seen a 15% drop in operating profit to £2.13b for last year.

Clearly, Lewis is under pressure to make drastic changes to turn the company around. This has already included freezing salaries for 400 senior managers after cutting the dividend by 44%. Wilson has also set a target of cutting the 31,200-strong global workforce by 2,000 in a bid to claw back £400m in costs. The decision to move the 600 administrative jobs in the UK offshore by 2014 will help reduce expenditure further.

The company has defended its actions, saying in statements that they expect at least a third of the role-cuts to be met through not recruiting for current vacancies, stopping temporary contracts and through natural turnover.

There is not much it can say to defend its decision to slash redundancy packages from a rate of four weeks for every year to two weeks, however.

Unite sees it as a double betrayal, with Hook branding Aviva as “callous”.

The company has merely pointed out that the new redundancy terms bring it in line with other companies and are above the statutory provisions. And to be fair, it isn’t doing anything that other companies, such as Marks & Spencer, have already done in recent years.

The CIPD wouldn’t comment, but its website acknowledges that “even during periods of high demand for labour, it is unrealistic to suggest that redundancy can always be avoided by a combination of human resource planning and employment flexibility.”

It is clearly financially in the interests of Aviva to relocate the 600 administration jobs to India, but whether it will help grow the business is another question – and whether it is morally right to abandon its workers at home for lower paid workers elsewhere is something they will have to wrestle with.

The company should perhaps note the public backlash against foreign-based call-centres and the fact that progressive companies such as Santander have relocated back to the UK. RBS, in fact, has always had a policy of basing its call-centres in the UK and uses it as a powerful marketing tool.

Nevertheless, there has been a growing trend for non-customer facing roles such as administration and IT to be moved offshore. In extreme cases, such as Cadbury moving its HQ to Switzerland and the recent corporation tax scandal surrounding Starbucks and Amazon, companies have managed to reduce the amount of tax they pay here, too.

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