Many economic statistics are showing that sovereign debt troubles in Europe are slowing overall global economic growth. In many states throughout the U.S., unemployment levels have started ticking back upward. Without relief in the near future, companies struggling to grow sales and profits may again turn to layoffs to help keep owners and shareholders happy. Below are five worthwhile alternatives to consider, as opposed to having to send employees packing.

Offer Retirement Packages
Large companies with the pocket books to offer payout packages for older workers close to retirement age can be a smart alternative to traditional layoffs. Certain employees jump at the chance to receive a package, which can be used for retirement or simply socked away while the individual seeks another job. These packages can be less contentious and personal than layoffs, and this can help retain younger workers that have many more years of productivity to contribute to a company.

Allow for Employee Attrition
A similar and straightforward strategy can be to simply not replace employees that have either left or retired. This strategy might be too slow during a severe downturn, but again can be less confrontational and free up the corporate payroll. A mix of retirement packages, not replacing lost workers and a reliance on temporary workers, which is covered below, might be the ideal mix. For a patient firm with the time to reduce workers slowly, this strategy can be among the best alternatives to layoffs.

Rely on Temps and Contractors
Since the credit crisis, a number of firms have hired temporary workers from staffing agencies or contract workers. Keeping a certain amount of workers more at arm's length can make it easier to make cutbacks with less strings attached, should it be needed down the road. Ideally, these temporary staff members would be offered more permanent employment with the related health and retirement benefits. In a downturn, the ability to quickly reduce staff can help a firm retain more tenured full-time employees.

Shorter Work Weeks
France tried to limit its work week to 35 hours roughly a decade ago, but abandoned the practice back in 2008 after it failed to pan out. However, it could make sense on a temporary basis to help a firm make it through a rough patch or short-term hit to its sales or finances. The credit crisis nearly ruined many firms that rely on credit to fund payroll and pay suppliers. In these examples, a temporary reduction in hours, or adding an extra week or two of unpaid vacation, can make a difference between survival and ruin when the economy heads south.

Cut Executive Pay and Perks
It's difficult to believe that upper management teams who implement corporate pay packages and related perks would have the stomach to cut their own compensation. However, millions of dollars could be saved during a downturn, and it can take cutting hundreds of lower-level workers to make up the difference. Ideally, pain in a time of strain will be shared by everyone in the corporate organizational chart. Cutting back C-suite can help make a quick and significant impact in saving profits.

The Bottom Line
During economic upswings, companies are usually concerned with how fast they can add new employees. Unfortunately, the economy has yet to fully recover from the credit crisis. Indications are that the global economy will see another slowdown before reaching the next full upswing in the business cycle. In this environment, it pays to be conservative. However, relying on traditional layoffs may not be the best strategy that a company can implement.

Related Articles
  1. Entrepreneurship

    5 Signs You’re About To Be Fired

    Often the signs of an imminent firing are subtle. Keep these five in mind.
  2. Investing News

    3 Stocks to Play a Falling Unemployment Rate

    Three stocks to consider as the unemployment rate falls.
  3. Entrepreneurship

    The Top 5 Under-the-Radar Cities for Job Seekers

    Don't be misled by 'Top 10' lists that rank cities purely on job growth. These cities get top marks for income growth and other key factors.
  4. Economics

    Leading Economic Indicators: U.S. Bureau of Labor Monthly Stats

    The Bureau of Labor Statistics' monthly employment figures are a key economic indicator. Here's how they work.
  5. Economics

    What Qualifies as Full Employment?

    Full employment is an economic term describing a situation where all available labor resources are being utilized to their highest extent.
  6. Professionals

    Is it Time to (Finally) Push Kids Out of the Nest?

    Parents should make sure their kids realize their home is a launching pad not a landing spot, and advisors can help clients talk to their children.
  7. Economics

    Understanding Frictional Unemployment

    Frictional unemployment is one aspect of natural unemployment, which is unemployment caused by things other than an underperforming economy.
  8. Professionals

    Millennials & Debt: Why So Many Still Live at Home

    More millennials live with their parents now than they did during recent recessions. Here's why.
  9. Taxes

    Top Tips for Minimizing Taxes on Severance Pay

    A look at the top ways to lessen the tax burden on severance pay.
  10. Economics

    Understanding Natural Unemployment

    Natural unemployment is often defined as the lowest rate of unemployment an economy will reach.
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at, and Determining ... Read Full Answer >>
  2. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  3. How does comprehensive income get reported on my 1040?

    As of 2015, on the standard IRS Form 1040, your comprehensive or total income is calculated through lines 7-22. This is different ... Read Full Answer >>
  4. What is the key difference between the participation rate and the unemployment rate?

    The participation rate and unemployment rate are economic metrics used to gauge the health of the U.S. job market. The key ... Read Full Answer >>
  5. How can minimum wages contribute to a market failure?

    The minimum wage acts like a price floor on labor, reducing the supply of jobs available to a level below the market-clearing ... Read Full Answer >>
  6. Do rising unemployment rates tend to increase or decrease investor sentiment and ...

    Rising unemployment rates tend to decrease investor sentiment and consumer confidence. Unemployment is one of the most important ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!