Small Business Alternatives to Layoffs

Suzanna De Baca -- Expert Business Source, 8/19/2008 12:43:00 PM

“They’re laying off at the plant,” my brother-in-law told me the other day.  Business has been slow at his company, which makes truck accessories, and a number of jobs had been cut.  

Companies large and small are searching for ways to cut costs and many are slashing jobs at all levels. A survey released in July of this year by PayCycle, a Palo Alto, California-based online payroll service, reports that almost half – a staggering 47%-- of small businesses are reducing their payrolls in a variety of ways.  Some of these small businesses are resorting to layoffs, but many are finding creative ways to reduce their labor costs.

While reducing your payroll may be one way to survive in difficult times, there are alternatives you can explore to avoid cutting jobs.

Eliminate raises.  According to the PayCycle survey, some small business owners are simply not giving raises. While most workers expect an annual cost of living raise and many anticipate a bonus, the majority of employees – from the board room to the factory floor – know that it is a tough market. If you explain openly that the choice is no raise or no job, most people will probably be grateful for the job.

Trade days off for the raise.  The PayCycle survey reported that businesses are also are offering extra days off instead of pay increases. Not a perfect solution, but as I mentioned above, I’m guessing the majority of workers would take a day off over being laid off any day.

Solicit cost cutting ideas from your workforce. Your employees may have great ideas for reducing expenses, and if the option is being terminated, they may be even more creative than usual. Ask your workers for their help – where can you cut costs? What insights do they have? Hold a contest with extra pay or vacation as an incentive. Create teams to brainstorm on ways to eliminate waste or increase productivity.

Rotating jobs. If you can’t keep everyone busy at their own job, give them the alternative of doing other jobs. For example, at a construction firm, workers who are standing around job sites could be doing maintenance or clean up at the shop; perhaps it isn’t their ideal work, but it is a job.

Job Sharing. Depending on your industry, job sharing may be an alternative. Two people can keep working, even if it is at one job. This is becoming more and more popular in certain industries, even in good economic times, so offer the option and see if employees are open to the idea at least on a temporary basis.

Ask workers if they’d consider voluntary unpaid leave. Again, rather than implementing an across the board layoff, ask members of your workforce if they would take a voluntary unpaid leave for a specific amount of time. You could continue their benefits and they could enjoy a vacation or time off. This option will depend on each individual worker’s job function and their financial situation, but they may be willing to trade time off for more permanent job security.

Creative compensation. If you can’t pay bonuses but can give other benefits (legally!), offer this alternative to your employees. 

4-Day work weeks. Many companies shorten work weeks in an effort to control costs. While hourly employees may earn less, they also save on transportation costs. Again, less money in their pocket is not ideal, but most employees understand the trade offs and tend to enjoy a day off – especially if it is Friday.

Be honest and upfront. Your employees know that times are tough. If you treat them respectfully, communicate openly, and ask for their input, you might be pleasantly surprised by the innovative ideas they offer. Similarly, if you establish an environment of trust, your employees are likely to be loyal and to work cooperatively with you to find a solution that keeps the business open. In the end, that means more money and economic security for everyone.

Suzanna de Baca is president of Private Capital Solutions Group. Securities offered through Broker Dealer Financial Services Corp. Member FINRA & SIPC. Investment Advisor Representative of Investment Advisors Corp., A Registered Investment Advisor. Material discussed is meant for general illustration and/or informational purposes only and it is not to be construed as tax, legal or investment advice. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice.