Alternatives to Layoffs: 10 Strategies for Maintaining Staff

By TERRA Staffing Group

Posted on April 13, 2020

Business leaders often face difficult decisions — namely, laying off employees to reduce costs.

Businesses like yours may be forced to make some difficult decisions. Scaling back costs may mean decisions that affect your workers’ pay, morale, and livelihood. Though layoffs can’t always be avoided, there are alternative cost-saving measures employers can explore that save money without laying off or firing their employees. Additionally, your company culture and values should inform your decisions. This article discusses cost-saving strategies that can help you maintain your staff and avoid layoffs during uncertain times. 

How businesses can avoid layoffs and maintain staff

Implement a Hiring Freeze

During a hiring freeze, all non-essential hiring activities are paused. This is a temporary measure and proactive way to manage operating costs. In the event of a hiring freeze, outline what responsibilities a new hire would have and determine how they can be distributed across your team. 

Hiring freezes may be disheartening for employers, who may feel like this measure is a step backwards. For employees, cutting costs with a hiring freeze may be a great alternative to layoffs. Of course, a hiring freeze may have a negative effect on employee morale for the short term, but this option may save your employees’ jobs.

Delay Bonuses

Have you promised bonuses or commission to your employees? COVID-19 and the disruptive economic situation may compromise those promises.

 Similar to a hiring freeze, delaying or eliminating bonuses and commissions is another proactive cost-saving measure businesses can take to avoid layoffs during COVID-19. Employees won’t love hearing that they’re not getting typical bonuses or expected raises, but reducing these expenses is better than reducing headcount. 

Cut Operational Costs

Operational costs encompass all the expenses required to keep your business running each day. This includes expenses related to rent, utilities, payroll, marketing and sales, administration, office, and more. You probably can’t skip rent payment, but here are some questions to help you determine operational costs to cut:

• How can you decrease office utility expenses, especially if your employees are working remotely?
• What business travel can you limit?
• What marketing and sales expenses can you cut back on?
• What recurring costs can you limit?
• Do you pay for any monthly services and/or tools that aren’t used frequently or that you can go without?
• Can you consolidate any services and/or tools?

Reduce Hours of Hourly Employees

Another cost-saving alternative to layoffs is reducing the hours of your hourly employees. After analyzing your staff’s workload, you may find opportunities for other employees to take on the work of hourly staff. Be sure to communicate with your employees about the reduction in hours; remind them this isn’t performance-based, and that there’s a good chance this measure is only temporary.

 While no one likes getting paid less, this is a better alternative than laying off hourly employees. 

Apply for Loans and Grants

The CARES Act includes $376 billion of relief funding for American small businesses and employees economically struggling from the coronavirus pandemic. According to the U.S. Small Business Administration (SBA), some of the temporary funding includes:

• Paycheck Protection Program – an SBA loan designed to help businesses keep staff employed 
• EIDL Loan Advance – provides up to $10,000 of assistance to struggling businesses
• SBA Express Bridge Loans – businesses that have an SBA Express Lender relationship can rapidly access $25,000
• SBA Debt Relief – another program designed to alleviate small businesses of financial hardship

For more information about loans and grants, visit the SBA’s COVID-19 small business guidance page.

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Reduce Salaries

When reducing employees’ salaries, do so strategically. Map out your expenses to understand where it makes most sense to get this money from. For example, reducing the salaries of company leadership may have the biggest impact. Sometimes salary reductions can hurt morale. To curb this, transparently and compassionately communicate changes with employees. There are several strategies for reducing salaries that could align with your company values. For example, some companies reduce the salaries of the executives more than the salaries of the lowest-paid employees to maintain morale.

Furlough Employees

Furlough (or unpaid leave) can help employers cut costs and maintain employees. In its “Employment Downsizing and its Alternatives” study, the Society of Human Resource Management (SHRM) notes that furloughs are generally less expensive than severance packages. SHRM also suggests that voluntary furloughs are a good option. For example, Ernst & Young gave 9,000 of its Chinese employees the option to take one month of unpaid leave and roughly 90% of the accounting firm’s auditors took the unpaid leave — decreasing payroll expenses by 17%. No one wants to be furloughed, but this could be one of your best alternatives to avoid layoffs during the COVID-19 crisis.

Reduce Benefits

Reducing employee benefits is one way you can avoid layoffs, but you’ll need to tread carefully. By law, you’re required to offer certain benefits to employees. However, the SBA explains that you don’t have to include certain fringe benefits. In addition, according to the U.S. Department of Labor, there aren’t federal laws preventing employers from reducing or getting rid of retiree health benefits. If you have to use this measure to maintain your staff, legal due diligence is paramount.

Decrease 401(k) Contributions

This is another unpopular option that would involve legal compliance research. But, experts say it can be done in times of severe economic struggle. If you’re desperate to avoid layoffs, reducing or halting 401(k) contributions could help your business stay open and keep staff on payroll.

Advocate Voluntary Retirement

Many companies offer early retirement packages to their employees to reduce or reshape their staff. The benefit of offering early retirement, or advocating for employees to voluntarily leave, is that it will free up money to keep other staff. Depending on what’s included in the your offer, voluntary retirement packages could cost money up front, but it could save money over time. 

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Today’s dynamic business climate requires dynamic solutions. We go the extra mile to understand and accommodate your unique organization, while tailoring our solutions to get you meaningful results. Connect with TERRA Staffing Group today to get started.

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