6 Resourceful Tips To Consider Before Making Layoffs

Dale Carnegie e-Newsletter

[To comment: larry at larry litwin dot com]
Dale Carnegie e-Newsletter
By Anita Zinsmeister, President of Dale Carnegie® Training of Central & Southern New Jersey



6 Resourceful Tips

To Consider
Before Making Layoffs
  • Word count for this issue: 645
  • Approximate time to read: About 2.6 minutes @ 250 words per minute

If your business employs a small yet dedicated staff, chances are that you’re anxious to survive downturns without having to resort to layoffs.  Experts say the instinct to avoid layoffs isn’t just human; it’s good business practice.  Layoffs may leave a company flat-footed when the economy picks up, and can also be surprisingly expensive when severance packages are figured in.  Below, you can find six resourceful HR cost-cutting tips to help you avoid having to make layoffs:

1.  Have Your Employees Contribute To Their Health Plans – This option is often an employer’s first move to reducing labor costs.  Small businesses that have been very paternalistic in the past may have lots of room to ask employees to contribute.  


2.  Use Subcontractors, Temporary And Part-Time Workers – When you lose an employee to resignation or retirement, try to replace that person with a part-timer, contractor, temp or self-employed freelancer.  These contingent workers do not receive the same benefits as other workers, and, if necessary, can easily be released by a firm.  As more companies lay off full-time employees during a recession, a deep pool of talented but unemployed individuals will be available for contingency work.  And when the economy turns around, if your contingent workers have proved their value, you can always bring them into your full-time fold.


3.  Freeze Or Cut Salaries – Although reducing employee salaries is a highly effective step in cutting HR costs, the move must be made carefully.  The first principle should NOT be fairness.  An across-the-board salary cut may hurt the organization in the long term if the move turns off top performers.  Although it’s important that everyone in the company share the pain, business owners should still try to compensate their top producers. 


4.  Reduce Contributions To Your Employees’ Retirement Plans – Companies with defined benefit plans don’t have much flexibility, because they need to make sure they are meeting the legal requirements for how much money is in their funds.  However, reducing or eliminating a company match for a 401(k) is a step that’s fairly easy for many companies to take.  Small businesses that use a standard format for setting up their 401(k) plans will probably find that they have flexibility about whether and how much they match.  In addition, employees will likely accept a one or two year reduction in the 401(k) match if a company communicates the reasons.


5.  Reduce Hours For Everyone’s Workweek – The 35-hour workweek has become an institution in many European countries, as well as in Asia.  Reductions in work hours — and corresponding reductions in pay — are considered far preferable to layoffs.  Treat the 35 hours as a base, and award extra leave to compensate for any excess hours worked.  Just be careful: if employees work overtime, they must be paid, or you run the risk of being noncompliant with the Fair Labor Standards Act.  You will risk a backlash if the 35-hour workweek is just a 40-hour stretch under another name.


6.  Attract Top Talent With Flex Hours – Flexibility has become a key factor in drawing top-notch talent.  Many workers are trading bonuses or pay raises for flexibility, allowing employers to get just as much productivity without the higher costs.  For small companies, using flexibility on a temporary basis is a great way to go during a downturn.  When trying to keep HR costs down, focus on output, not face time.


Executive Summary:  While layoffs are often unavoidable, they should be used as a last resort.  Cutting into your workforce can leave your company vulnerable in the short-term, and also unable to capitalize on an upswing in the long-term.  If you employ some of the strategies outlined above, you may find that you do not have to take drastic measures with your personnel.  Most companies can make significant cuts in overhead expenses without
resorting to layoffs. 
[To comment: larry at larry litwin dot com]