When the country is dealing with a weakening economy and high energy and health care costs, American small businesses no doubt feel the pinch. On top of that, the federal minimum wage increases also affect small business owners. On July 24, 2008, the federal minimum wage increased from $5.85 per hour to $6.55 per hour. It increases again to $7.25 per hour on July 24, 2009.
During periods of economic uncertainty, increased costs and declining sales, business owners are sometimes forced to evaluate cost-cutting options including downsizing and layoffs. When these measures become necessary, they often arouse negative emotions and stir up negative thoughts.
When a business is in a cost-cutting mode, downsizing and layoffs can take different forms:
- Reduction in force—this is when an employer decides that its labor costs are too much, so they reduce the number of positions.
- Position elimination—this is when an employer determines that the position skill-set requirements have changed, the market and competition have changed or sometimes the position simply goes away.
- Restructuring—while disruptive, some employers find it necessary to restructure their organization. Basically, companies restructure in order to reassess strategies and improve operations.
Unfortunately handling downsizing and layoffs is a fact of life in the HR profession. If you are considering this step, I hope you can benefit from my professional experiences in these areas.
Because your business employs people with hearts, minds and souls, it is important to handle downsizing and layoffs with consideration and respect. Here are some tips to minimize the negative impact:
- Implement a communication strategy (viewed as a process not an event).
You will want to involve HR in the process as quickly as possible. In addition to directly affected employees, it is important to take time and think through all the organizational structures. Who are all the people who will be affected, such as co-workers and external and internal customers? How will you communicate your messages; how will your messages be sent; what is the content of your messages; when will they start; and when will they end? Make sure others who handle external inquiries are made aware such as the receptionist and other contact staff.
- Treat employees with respect and preserve their dignity.
You want to plan termination actions with empathy, respect and consideration. Your first consideration should be preserving your employees’ dignity. For instance, don’t let them find out they are terminated by discovering their access card has been deactivated. Also, we’ve all heard of companies informing their employees of a layoff by appearing at their desk with a moving box for their personal belongings.
Instead, you want employees to hear this news directly from their manager, preferably through a personal conversation. You don’t want to downplay the news. It is important for the employee to receive the information about their layoff in a straight-forward manner so they understand it.
Finally, consider ways for employees to leave the building and strive to ensure their privacy.
- Provide assistance from an employee assistance program (EAP).
Many employees will react emotionally to this news. You can expect a variety and range of emotions, from crying to shocked silence. You can refer employees to confidential individual counseling. You can also arrange for a certified counselor to speak and meet with affected employees in a group setting.
Also, remember the employees remaining, those not directly affected by the downsizing and layoff actions. They often suffer from what is known as “survivor’s guilt.” Many employees feel guilty because they still have a job and close co-workers no longer have one. Some express feelings such as, “It’s not right that they lost their job and I still have mine. “ To help them cope and be productive employees, they may need the attention of an EAP as well.
If you treat employees with respect and dignity, you will minimize the negative effects. Downsizing and layoffs are definitely unpleasant, but handling matters in a professional and caring manner is always the best course of action.
Federal or State Laws Regarding Mass Layoffs
As a final note: The WARN Act (Worker Adjustment and Retraining Notification Act) is a federal law requiring employers to provide at least 60 days advance notification of plant closings and mass layoffs. To understand your legal obligations and responsibilities, or other related state laws, consult with an attorney.