Exploring Alternatives to Layoffs

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It seems as if each day we’re getting more news reports of employers slashing jobs. It’s hard to check your e-mail, surf the web, or turn on the news without hearing about another big layoff.

The reason, according to CNN.com, is that “businesses are faced with sagging demand for their products and services in the wake of this global recession. That’s causing sales, earnings and stock prices to dip. So one way to try and preserve profits is to lower costs — and payroll is usually one of the first places a company looks at to slash expenses.”

For many companies, layoffs might seem like one of the only answers to cutting expenses. Some companies, on the other hand, are looking at alternatives to layoffs in order to preserve jobs and retain their top talent. According to a recent ERC press release, “employers in Northeast Ohio are taking a variety of steps in order to preserve jobs and curb the need for large reductions in force.” We’ll explore some creative alternatives to consider before deciding whether or not layoffs are the most effective way to go:

Wage reductions. This is a very traditional alternative to laying off employees, and can sometimes be a welcome trade-off for employees looking to keep their jobs. Wage reductions require an open communication stream between management and employees.

Reduced Hours. Some employers are not only reducing employees’ wages, but also reducing their hours worked relative to their reduction in pay. For many employers, this means eliminating one or two days during the week. This might also lead to or be mixed with the next option…

Job Sharing. Rather than laying off one full-time employee, some companies are combining two jobs into one. Job sharing allows two employees share the same position in the company, with each employee working part of the week. One key factor to consider before initiating a job sharing role – according to the Department of Labor, “in order for a job sharing arrangement to be successful…both individuals must be able to handle the position as efficiently as one person.”

Shifting Outsourced Work to Employees. Try finding ways for your employees to absorb some of the work that is currently being outsourced. This might also be an excellent opportunity to get your employees actively involved in Professional Development and developing or learning new skills.

Offer Sabbatical to Employees. In some cases, you might have an employee who has been wanting to take a dream vacation or a second honeymoon for a long time, but never could because of their full-time job responsibilities. Or you might find an employee wants to pursue a long-time hobby… Offering sabbatical to employees can sometimes free up some extra funds until the organization gets settled once again.

While layoffs might seem like a simple solution for some, it might have an adverse effect in the long-run. For example, the cost of recruiting and training new employees down the road might outweigh the benefits of lowering your payroll. According to Human Resource Executive, one of the reasons that layoffs might not be as attractive is that “most companies just spent the last few years struggling to recruit and retain the workforce they need. To lose them voluntarily seems like shooting yourself in the foot.”

So does a layoff really save the company money in the long-run? It definitely makes sense to look at all the factors before making a decision. “A five-percent salary cut saves much more money than a five-percent layoff because there are no severance payments; the legal liability and associated costs are much less; and the savings come instantly without the agonizing administrative process of figuring out who has to go and getting them out in a dignified manner, etc.,” according to the Human Resource Executive article Alternatives to Layoffs.

For more information on layoffs and reductions in force, ERC is hosting Layoffs and Reductions in Force: What HR Needs to Know, a half-day workshop by Frantz Ward LLP and CareerCurve on February 18. Click here for more information.

Sources:
Department of Labor (
http://www.dol.gov/dol/topic/workhours/jobsharing.htm)
CNN.com (
http://money.cnn.com/2009/01/27/markets/thebuzz/index.htm?)postversion=2009012713
Human Resource Executive, “Alternatives to Layoffs” (http://www.hreonline.com/HRE/story.jsp?storyId=158416635)

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This entry was posted in Benefits & Leave, General HR and tagged , , . Bookmark the permalink.

3 Responses to Exploring Alternatives to Layoffs

  1. Shweta Khare says:

    great take on some solutions to layoffs. I loved your idea of “Offer Sabbatical to Employees” at least thety can count on coming back after sometime and use this time to invest on further studies or part-time jobs… but sadly most companies are not doing so..
    it’s the start of the new year and more layoffs will de-stabilize the economic conditions already on the downhill by rising prices etc,,
    great post.. hope someone implements what we suggest around.

    Your readers might find similar thoughts on my blog: http://careerbright.blogspot.com

  2. dcy1959 says:

    It’s heartening to see that people are coming to a similar place via different paths: I recently blogged about layoffs and social responsibility, citing the devastating psychological impact of involuntary job loss: http://newworkplace.wordpress.com/2009/02/11/no-layoffs-as-social-responsibility-indicator/.

    Instead of shedding jobs, I hope that employers will think twice and consider some of the options set out in your post.

    David Yamada
    Minding the Workplace
    http://newworkplace.wordpress.com

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