Finance News & Insights

Chopping costs without chopping heads

To lay off or not to lay off? Here’s an alternative for when it’s gotten that bad.

Layoffs, reductions-in-force, giving the axe– no way to sugar coat it, you’re taking people’s jobs. You hear about a new instance almost every day. And so have your employees.

In some industries, it’s becoming a question of when, not if, they will lay off employees.

Of course big companies can cut 100 or even 1,000 jobs. It’s a lot tougher to swallow if you’re a small business.

But there is good news for the little guys: It makes another alternative much more feasible. Instead of cutting headcount, think about cutting schedules.

It’s a three-step progression:

  1. Cut all overtime
  2. Cut hours, and
  3. Cut the workweek.

You may never need to go to “DEFCON 3.” If the first or second steps are enough to stop the bleeding, it’s mission accomplished.

But you have to be prepared to go the whole way. Here’s an idea how that would play out.

An overtime freeze will probably impact the fewest employees, so balking won’t be as bad. (Plus it tends to impact lower level — and sometimes easier-to-replace — members of your staff.)

From there, some companies have gone from a 40-hour a week to 36 hours — across the board. And time works in your favor on this one. Yes, there’s a financial hit, but a little extra time in summer may be easier to swallow.

If that still doesn’t help enough, one Controller told us his company was forced to go to a 4-day work week. Few were thrilled with this decision, but it sure beat the alternative.

And remind folks, none of this is permanent — once things turn around you can gradually reinstate regular schedules.

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  • Gladys B

    What about mandatory 10-15% cut in exec salaries?? Seems to me, that if entry level personnel and laborers have to give up pay, then execs should be more than willing to, as well. The ones that reap the most, are usually the first to give back in hard times.