Denise Kingland Jennings

Getting Crafty with HR

Look For Alternatives to Layoffs

Layoffs have become an automatic response for companies needing to cut costs. It’s unfortunate that layoffs are their first thoughts though, because there are some alternatives they could think of instead.

During a slowdown or times of economic downturns, many layoffs are just used as a temporary stop-gap measure, so instead of laying off members of your workforce, here are a couple alternatives to consider to help you find the best long-term solution:

• Ask employees to take a schedule reduction;
• Have employees consider either temporarily or permanently transitioning to lesser-paid positions. In some cases, this option may even be viewed as positive. For example, if an employee is a manager, but in their heart of hearts, they don’t really want to be a manager, they might be happier taking a lower position.
• Ask managers to take a temporary pay cut.
• Offer retirement exit incentives that apply if qualified employees choose to retire early. Be cautious of this option, though, and seek employment counsel to assist you in order to avoid potential age discrimination issues.
• Implement a voluntary layoff program where employees have the option to resign in exchange for certain severance benefits. Again, it is important to consult with employment counsel to avoid legal snares in this process.

If you do decide to implement a reduction in pay, this situation works best if it is applied across the board and includes management personnel.

Deciding If Layoffs Are Necessary
Anytime you’re dealing with people’s jobs, you need to have a Human Resources (HR) perspective. You need to weigh:

• The risks;
• The costs; and
• The benefits.

It’s always best to see if there are other ways to cut costs before you actually start eliminating jobs. Along these lines, an employer should not forget to assess the resources that must remain within the business after the layoff takes effect. It is essential to take the steps necessary to ensure the right employees remain within the organization to provide the skills, leadership and other competencies central to the success of the business.

Here are some steps you should take if you determine a layoff is necessary:

1. Be clear about what the purpose of the layoffs is—Is it a reorganization? Are you realigning the company around new goals? Are you trying to create a productivity-focused work environment?
   
   
2. Speak with your HR department—Once you’ve clearly defined your outcome, you need to speak with your HR department and discuss timing of the layoffs, the rationale and, in particular, you want to carefully think through your selection criteria for who is getting laid off.
   
   For example, do you base it on seniority? Do you base it on performance? Do you base it on skills and who’s cross-trained in more than one job? Importantly, from a legal perspective, any criteria used as a basis for a layoff must be neutral and objective in nature, and be applied consistently and without discriminatory effect (for example, no disparate impact on any particular legally protected class).
   
   You need to carefully think through your selection criteria and write it down. It can be as simple as creating a file with a list of employees, their salaries and different scenarios you run. A scenario example could be, “If we reduced these workers to 30 hours, their salaries would be ‘x;’ if we eliminated their position, the savings would be ‘x.’”
   
   Once you’ve identified the people who will be laid off, you want to create a spreadsheet that explains how you approached the layoffs and the criteria that you used.
   
   
3. Be honest with employees—Keep your employees informed, and be truthful with them. Tell them outright, “We are in cost-savings mode right now, due to business slow-down, and we’re trying to find ways to avoid doing layoffs.” Then ask your employees if they have any ideas for ways to cut costs.  
   
   Sometimes employees have very clever ways of saving money that management might not have necessarily thought of. If employees can come up with enough ideas, you may be able to avoid layoffs altogether.

 

 

 

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