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Aarhus BSS must reduce costs by DKK 40 million: Layoffs are unavoidable says the dean

Aarhus BSS must reduce costs by DKK 40 million by 2026 as a result of decreasing student intake. Two departments will be hit particularly hard and dismissals may be necessary. Dean Thomas Pallesen does not expect to lay off more than 10 people.

According to the dean, the cost reductions at Aarhus BSS of DKK 40 million per annum must be achieved through financial prudence and economising on operations. Photo: Roar Lava Paaske

Several Danish universities are under financial pressure these years due to political decisions, changes in student behaviour and external factors such as rising energy prices and lower yields on the financial markets. Aarhus University is no exception. The Faculty of Natural Sciences has already announced a need for cost reductions totalling DKK 37 million a year, which may result in mass layoffs.

Nat to cut 37 million kroner in costs – mass layoffs may be on the table

Aarhus BSS also needs to implement cost reductions in the millions. The faculty will need to make cost reductions totalling DKK 40 million according to Dean Thomas Pallesen.

"In total, we need to cut costs by approx. DKK 40 million,” says Thomas Pallesen.

The Department of Economics and Business Economics and the Department of Business Development and Technology in Herning are the two departments facing the biggest financial challenges. The two departments will need to go through a budget adjustment round.

"The first task is to find savings without having to lay anyone off. We’re working really hard to avoid that,” says Thomas Pallesen.

However, he does not believe that the faculty can avoid dismissing employees.

"I don’t think we’ll be able to completely avoid it. But I do think the layoffs will be limited. Fewer than 10 is what we’re hoping and expecting," he says.

A deficit of DKK 19 million last year

At the two afflicted departments, employees will be given the opportunity to apply for a voluntary redundancy package or senior staff scheme. Thomas Pallesen does not yet have an overview of how many people have applied for one or the other, or how much it may positively affect the budget.

"Once we have an overview, we’ll be able to see if we still need to make layoffs," he says.

Aarhus BSS ended 2022 with a deficit of DKK 19 million and has budgeted a deficit of DKK 9 million for 2023. The faculty aims to balance the budget in 2024.

According to the dean, the cost reductions at Aarhus BSS of DKK 40 million per annum must be achieved through financial prudence and economising on operations.

"Our budget for operations is lower than before Corona. We will also avoid refilling vacant positions if doing so is warrantable. And then we’ll try to generate more income by attracting more external funding," says Thomas Pallesen.

Even though only two out of six departments at Aarhus BSS are under so much financial pressure that layoffs may be necessary, they will not have to carry the burden of cutbacks alone.

“We stand should to shoulder with each other at this faculty.   And the other departments will also need to make cutbacks. However, we work based on the principle that things must be balanced at faculty level and departmental level. So if we can see that there’s a structural imbalance, we’ll have to make an adjustment, just as we’ve done in this case. Those are the rules of the game," he says.

Educational income has dropped off

The financial situation at the faculty is due to a number of factors, including the high inflation rate, but Thomas Pallesen highlights the diminishing number of admissions. The faculty's educational revenues dropped by DKK 43 million from 2021 to 2023. This is mainly due to Aarhus BSS going from 9,906 student FTEs earned to 9,017 in 2023. Student FTE income is the amount of money the university receives each time a student passes an exam.

"I'm of course upset that we’ve ended up in this situation. One of the reasons for it is the decrease in student FTEs due to students not showing up to their degree programmes. That’s why we’re in this situation, and that's a shame, because we have a lot of qualified applicants, so it’s frustrating that we can’t fill all the places.

Having said that, we have looked at whether we can do something in relation to standby places and overbooking, so we don't end up in this situation again. Once we’ve implemented these adjustments, we’ll have a good, healthy and well-functioning faculty, especially since we also expect our educational revenues to get back on track," says Thomas Pallesen.

According to the dean, there is one thing looming on the horizon: uncertainty about the continuation of the taximeter increase. It has been extended every year for ten years, and temporarily extended for 2023 while the Finance Act is being prepared. However, it might not be extended and that would cost the faculty DKK 45 million.  He also mentions the reform of Master's degree programmes, which may also have unforeseen financial consequences for the faculty.  

Arts also needs to implement cutbacks in the millions - Health and Tech do not

Another faculty that needs to implement cutbacks is Arts. According to the minutes of the faculty’s liaison committee meeting on March 9, Arts will need to make cost reductions to its payroll budget amounting to DKK 48 million no later than 2026.

Cost reductions will need to be made by the School of Communication and Culture (CC) and the School of Communication and Culture (CAS). CAS will need to make adjustments sooner than CC due to different degree programmes. CAS has several Master's degree programmes, while CC primally has Bachelor's degree programmes, which means they will have their current students for a longer period of time.

Johnny Laursen, dean of the Faculty of Arts, would like to wait with commenting on the cutbacks until after AU’s board meeting on 14 April.

The two remaining faculties, Health and Tech, will not have to make cost reductions. However, Tech went through a big round of cutbacks in 2021 and eliminated 80 positions.