Alternatives to Layoffs

In times of economic crisis, many businesses find themselves facing the possibility of layoffs. They reason that the majority of their expenditures are in payroll, so logically, payroll should be the first area to face reductions. There are, however, hidden costs to layoffs, including severance packages and potential legal fees, as well as the future costs of hiring and retraining new employees. Therefore, the following alternatives should be considered before resorting to company-wide job cuts:

1. Offer more unpaid time off.

Whether mandatory or voluntary, unpaid time off is a great way for companies to cut costs without eliminating positions. Whether you offer employees the opportunity to skip work on Fridays or give them an extra two weeks of vacation to use during the summer months or over the holidays, a surprisingly large number of employees will likely accept your proposal. Especially during times of the year when children are home from school, you’ll find that many employees value their time more than money, which could mean significant savings for your company.

2. Switch to commissions.

If your company’s line of work lends itself well to commission-based salaries, consider implementing them to help cut costs. Commissions-based pay allows you to lower base salary rates while contributing to an increase in productivity among employees. Linking employees’ salaries directly to their level of productivity ensures that only those employees who contribute to your company’s success are financially rewarded. As an added bonus, because ineffective employees are paid less in a commissions system, they are more likely to leave your company, thereby allowing weak staff to eliminate themselves from payroll.

3. Cross train employees.

Like commissions, cross training employees is not a viable option for all companies, but if it could be implemented in your business, consider doing so to help save your company money. Cross training involves training employees to do more than one job, thereby reducing or eliminating the need to hire seasonal employees, temps, or contractors. Can your secretary also be trained to manage the holiday rush for which you usually hire an assistant? Could you teach your drivers how to do the cleaning job you normally contract out? If you are considering layoffs, it means business has slowed, and if business has slowed, your employees likely have more time on their hands than they’re used to. This means that they should have plenty of time to be cross trained and become efficient at more than one task, which could translate into significant savings for your company.

4. Hire interns.

If you cannot cross train to eliminate the need for seasonal employees, temps, or contractors, consider hiring interns instead. Interns, who are usually college students, are a unique way to build your staff without drastically increasing your payroll expenses. Often, students are obligated to complete an internship for graduation, so many of these students are willing work for very little pay or even just credits towards graduation requirements. Also, because internships are expected to be temporary arrangements, there will be no hard feelings or complicated paperwork once your need for their services reaches an end. To cut costs and hire interns, contact colleges in your area to determine the guidelines for establishing a for-credit internship program within your company.

Because layoffs, although a seemingly logical solution to the problem of slow business, are rarely an effective long term strategy, consider these creative alternatives to help your business cut costs without ever touching the payroll budget.

About Andrew Jensen

Andrew Jensen, a business growth, efficiency & marketing consultant, provides business advisory services for clients in the Baltimore; Washington, D.C.; York, Hanover, Lancaster & Harrisburg, PA regions. Andrew advises regarding business growth, productivity, efficiency, business startups, customer service, and online/offline marketing. Follow Andrew on Google+

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