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Refreshing Insights

Have suppliers doubled their material costs? Are revenues down? Maybe you lost a major customer? Despite a robust economy, even the most successful companies can experience occasional periods of unforeseen financial difficulties. When that happens, the last thing you want to do is issue a layoff of your valued employees.

As an employer, you care for your employees’ well-being and want to do whatever you can to protect their livelihoods and maintain your culture. While reducing your workforce is sometimes the only solution, consider looking closely at other options before you take that step. 

1. Hiring Freeze

A hiring freeze can help cut overall business costs by allowing non-essential positions to go unfilled for a period of time until finances improve.

During this time, a company can look for opportunities to consolidate its workforce, cross train employees into other areas or possibly restructure its staff to improve efficiencies. Some employees may need to work extra hours or take on extra responsibilities. While a hiring freeze will help in the short term, it is important to give employees an idea of the length of time the freeze will last. If a freeze lasts too long, it can affect a company’s culture, morale and retention rate.

2. Freeze Salary and Benefit Increases 

Through the years, your employees may have become accustomed to regular salary increases and bonuses. When financial difficulties arise, however, suspending wage increases for a period of time could be an alternative to laying off employees. Open and honest communication about your company’s financial situation with employees is critical to foster understanding. Even more important is outlining the plan and a timeline for turning things around to provide some assurance of future salience.

Additional considerations might be taking a look at costly benefits and other perks, such as company vehicle usage, costly company parties and miscellaneous reimbursement expenses that add up.

3. Reduce Hours and Overtime

Non-exempt employees may be willing to reduce their hours or restrict overtime to help reduce labor costs for your company. Some states have adopted shared-work programs that allow two employees to temporarily reduce their work schedules to complete a job that would normally be for a single full-time employee.

4. Voluntary Layoffs, Furloughs and Early Retirement

Employees can be given the option of taking a voluntary layoff without pay. An employee who comes to an agreement with an employer and is voluntarily laid off and/or voluntarily quits may qualify for unemployment benefits depending on the circumstances.

Some companies issue mandatory unpaid leave (a furlough), which can be a good short-term option. Employees generally take short leaves — perhaps a day each week or a week at a time — to bring down costs. More extended leaves can  be appealing to some employees who want to travel or have other interests they want to pursue.

Encouraging early retirement and offering early retirement packages is also an option, especially for those employees close to retirement. When investigating this option, have a well-thought out plan that takes in to account all applicable laws.

When Layoffs are the Only Option

If none of the alternative options mentioned will reduce costs enough, you may need to issue a layoff. This is an extremely difficult decision, especially when you’ve worked so hard to foster a culture of care and trust, or when the decision isn’t based on performance issues. Whether a single employee or several, be aware of laws to protect those being laid off, especially if the layoff affects multiple individuals.

Maintaining a healthy company culture for those who remain will be the most difficult task for an organization after a layoff. You’ve likely worked hard to create a family-like atmosphere that will be disrupted, and morale and productivity may suffer. Stay engaged with employees through open and honest communication to help them understand why the decision is in the best interests of the company and its remaining workforce as a whole.

Document Everything

Proper documentation is critical no matter which option you choose, and compliance with local, state and federal regulations is a must. It can be difficult for even the most seasoned HR professional to navigate all the requirements of downsizing a workforce or limiting hours or benefits.

Consider working with an outside HR services provider to help ensure compliance and, just as importantly, to help you properly communicate any upcoming reduction in your workforce so you can continue to strengthen your workplace culture. McClone's experienced HR team is here to help. Reach out for a complimentary needs analysis.

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A collection of articles from the McClone team with the helpful knowledge and insights to ensure your organization is well protected.