Business owners and leaders are faced with a tough decision during times of failing economy - to layoff employees or not. As drastic as it sounds, this is often the first solution that comes to mind in order to improve cash flow and keep the business afloat.
This is not an easy decision but one that is vital when profitability is not in alignment with your company goals. Before laying off employees, try other cost-cutting strategies for companies to ensure business continuity despite the monetary challenges.
Choosing to retain your employees will enable you to maintain a fully-functional and experienced team. They are vital to sustain your business operations and help you bounce back quickly once the tough times are over.
Best Alternatives to Layoffs
Your employees are your best asset. When laying off employees seems inevitable, do know that this is not your only option. Consider all possible alternatives to downsizing as letting your employees go could cost your company more in the long run.
You will cover the cost of severance if you choose to let your employees go. There is also a risk of litigation, especially when you lay them off during a time of crisis or recession. And the worst case scenario is that you could alienate your employees or lose talent that you might not be able to replace. Think about the cost of recruiting new talents once the business recovers. Most importantly, the morale hit is far more devastating than any monetary losses you stand to experience.
Below are some of the alternatives you can try on how to avoid layoffs:
One of the best cost-cutting ideas for large companies without resorting to employee layoff is to reduce the workload. If, for example, your employees work 40 hours a week, ask them to reduce it to 20 hours per week. Employees get to keep their jobs and you can maintain productivity in your business. At the same time, you reduce the operational cost without losing your valuable assets – your employees. This will spare you from the hassle of re-hiring once the economic situation improves.
Implement a Hiring Freeze
This is one of the best alternatives to layoffs since you can optimize your existing workforce. By implementing a hiring freeze, you can keep the essential positions such as those involved in directly serving the customers of your business. Focus on employees that help generate revenue for your business. Any non-essential positions can remain vacated until you are in a position to hire again.
Consider Benefit Cuts
Companies implement benefits and other perks to reward their employees for their performance. But during times of financial crisis, these extra costs are challenging to sustain. Discuss the possibility of cutting off their benefits and perks for the time being. You can also hold off on any salary increases during this difficult time.
Make sure to communicate to your employees that this is only temporary. Let them know that you will review this decision periodically until such time that the business’ bottom line improves. Handling this through proper communication is vital to the success of this cost-cutting strategy; otherwise, it could turn sour and leave your employees unhappy.
Let Temporary or Contractual Workers Go
If it comes down to it, it is cheaper and legally easier for companies to let go of contractual workers. Most contract workers expect it during times of financial difficulty for a business - hence, they will understand your decision. This will enable you to focus your finances on employees that are vital to the business continuity. It is also a practical decision to stick with experienced employees who already know your business practices.
Switch to a Flexible Office Space
One of the best cost-cutting strategies for companies is to switch to a flexible office space. Serviced offices offer the best and practical solution in this case. This type of work environment is practical because it will help you cut cost as you switch to a smaller working space when needed. You can easily upgrade to a bigger working space when time comes that you are ready to scale up on your operations.
Just as the space offers flexibility, the contract terms are also flexible so it can be modified to suit your business needs. The most important benefit is that your employees can have a clean, safe, and productive working environment.
Devising a variety of strategies to cut cost without the need to lay off your employees is important during times of financial crisis. Layoffs put a lot of stress on the company – from employees to let go to the remaining staff members. At the same time, employee layoffs could indicate that your company is struggling and it won’t help your business reputation (especially in the eyes of the investors and business partners).
However, every company is different and you should consider the path you take based on your corporate culture. If layoffs are absolutely necessary, be sure to lean on your legal counsel to ensure that you do not violate any local or federal laws. Communicate it properly to your employees and let them know you have considered all possible alternatives to layoffs.