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.