5 Layoff Alternatives that will Save You Money without Reducing Your Workforce

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Companies are laying off people again and some financial experts say we might experience another financial downturn because of China’s slowing economy.

Before you start listing employees to layoff, consider how much a restructuring can cost your business, especially in the long run. Aside from severance pay, and the risk of litigation, your business will also suffer from the low employee morale of surviving employees. When things turn around for the better, you’ll need to hire and train new employees — another added expense.

For these reasons, a layoff should be your last option. Don’t even consider it if you’re only facing a few months of low profit, as there are other less drastic ways to cope.

Employee and Budget-Friendly Ways to Cut Costs without Layoffs

  1. Hiring Freeze

This is a perfect strategy for reducing HR and labor costs. It’s so odd that so many companies continue hiring new talent, while letting go of other people. It’s confusing not only for employees, but also for the new hires. Are they in good hands with your company, or are they part of some type of experiment? If you need to cut costs, just stop hiring, temporarily.

If need be, transfer redundant employees to another department where they’re needed.

  1. Cut Wages

No one wants to have their salary reduced but it is way better than getting no salary at all. Besides, this decision is better received when the reduction affects everyone, including the C-suite.

A great example of this is FedEx, who reduced the salary of their executives by 7.5 to 10 percent, and employees by only 5 percent.

  1. Incentivize Employees to Come up with Ideas to Save Money

Asking employees for their ideas shifts the ownership of the problem to them. It also gives them a sense of control over what’s happening.

For instance, someone might suggest switching coffee brands or removing the free coffee perk altogether to save money. You can offer a five to 10 percent reward based on the money saved, for every idea implemented. So if not offering free breakfast or dry cleaning saves the office about a $1,000 a month, reward the employee $100 for his suggestion.

  1. Reduce the Workweek

This strategy is an oldie but goodie. Changing the workweek to a four-day schedule can minimize payroll expenses up to 20 percent.

  1. Lease Employees to Other Businesses or Subsidiaries

“Lend” or subcontract employees to subsidiary companies or other businesses in your locale, as long as they’re not direct competitors. This way, employees will continue receiving a paycheck, and the leasing company that benefits from their labor will reimburse you for their salary. It’s also a good way to cross-train employees in different industries.

Small Sacrifices for Everyone

Yes, your employees may not be happy about your decisions to cut some of their benefits of reduce their salary. But they’ll appreciate it when they find out the lengths you went through to keep them on board.