Alternatives to Laying Off Employees When Downsizing

Tips On How to Lay Off Fewer Employees When You Need to Cut Expenses

Young woman in empty office space with moving boxes
Kai Chiang

One of the biggest expenses for many business owners are the costs associated with hiring, training, and maintaining employees  -- and in terminating their employment. When companies downsize, one of the first places they look to trim costs is by reducing the number of employees and/or employee related expenses such as benefits packages.

Downsizing is sometimes necessary, but never to be taken lightly.

  It sends a message to stockholders and investors as well as to customers that a business is struggling.  Layoffs also contribute to lower employee morale and may even lead to other employees concerned the their jobs to leave on their own.

Consider All Your Options

Before laying off employees, be sure that you have looked at all the options, including asking your employees what they would be willing to make sacrifices for the good of the company. Employees can show surprising loyalty and flexibility for the good of the company – and to save their jobs when being faced with downsizing or layoffs.

Because employee morale will always be affected when a company downsizes, it makes good business sense to allow employees to chime in with their opinions and feelings. Few things make employees feel less valued than to surprise them in a meeting or memo that people will be let go.

Your employees are in the day-to-day trenches and some may even have ideas on how to save the business money, or be willing to give up benefits, change their hours, or make other accommodations in order to keep their jobs.

Solicit Your Employees for Their Ideas

Never underestimate the value of simply asking your employees for their suggestions and ideas. Even if their ideas do not make good business sense and cannot be put into action, you, as the employer will have demonstrated to your workers that they matter. This morale booster may prove beneficial to employees who remain in your employment, especially if their job duties increase as a result of laying off other workers.

Offer Job Sharing

If you can combine the skills of two employees into one position, job sharing can help both employees keep their jobs but will cut your hourly wage costs. This may not work for all employees, but for some, reduced hours may be a preferable alternative to losing their job.

Cut Back on Employee Benefits

Most workers need their health insurance benefits, but other benefits like vacation pay, sick leave may be able to be trimmed down, or your policies can be revised to make them more cost effective.

For example, requiring employees to work a certain number of hours in order to accrue paid sick leave, rather than offering it all up front, can spread the costs out over time. Paid Sick Leave – Is it Required by Law?

Change Your Work Week

Many local governments throughout the country save money by staying open for business four days a week instead of five. This saves on salaries as well as operating costs.

When You Do Have to Lay Off Staff

If layoffs are coming you either need to make the details as public as possible to avoid panic -- or completely under wraps.

  When information is "leaked" it is often misinformation that ends up as gossip and can cause employee relations problems.

Have a plan in place in advance for those you are terminating  Offer severance pay if you can and consider handing them an "exit" package with tips on job hunting, job leads, reference letters, and special resource and hot lines for the unemployed.

Try not to feel too bad -- as hard as it is to lay off anyone during a downsize if it is necessary in order to preserve the longevity of your business you can rehire when you are in a better position to do so.  Every day, businesses all over the world reorganize and downsize.  It is nothing to be ashamed of, it is just an unfortunate reality for many businesses.

Remember, before laying off employees, be sure that you have looked at all the options, including asking your employees what they would be willing to make sacrifices for the good of the company.  Employees can show surprising loyalty and flexibility for the good of the company – and to save their jobs when being faced with downsizing or layoffs.

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