6 Alternatives to Layoffs You May Not Be Thinking About

The pandemic has promoted payroll to the top of the list of things keeping employers up at night. Amid the accompanying recession, many leaders mistakenly believe that laying off employees is the only way to keep the lights on. The reality, however, is that there’s often a better way to keep the economic headwinds at bay and your star talent intact.

If your organization is faced with the difficult decision of where and how to cut costs, consider these six strategies to reduce operational expenses. These simple yet often overlooked methodologies can help bolster the morale, performance and loyalty of your team while promoting solidarity, security and equal opportunity – and, in the process, ensuring compliance with local, state and federal regulations.

Leverage state unemployment programs, including work share.

Many employers don’t realize the breath of unemployment options available to reduce salary overhead and the vast benefits these alternatives provide to companies and employees alike. For example, under the regular unemployment process, an employer elects to reduce employee work hours and unemployment supplements the employee’s wages. With the current state and federal unemployment program enhancements, employee’s only experience a minimal reduction in salary. The employee, however, must meet specific requirements to maintain regular unemployment, including diligently seeking additional work.

The work share program is an excellent alterative and can be a saving grace in this uncertain economic climate. This program is supported by legislation in over half of U.S. states, yet leaders in many industries, such as higher education, restaurant, retail and hospitality, either don’t realize this benefit exists or are not fully capitalizing on its value. With work share, an employer could elect to reduce employee work hours by 20% and agree to maintain healthcare and retirement benefits. The company would then pay the employee for 32 hours a week instead of 40. And similar to the standard program, unemployment supplements the employee wages. That said, with work share, employees aren’t required to seek additional employment. Therefore, the company doesn’t risk losing high functioning talent to the competition, avoids the need to hire and train new employees, and has the ability to increase the employee’s work hours when business needs (and the economy) rebounds.

Ultimately, analyzing all available unemployment options and benefits is imperative. Your HR team is steeped in the federal and state work-share laws to manage how the program is rolled out across the organization, so they can provide guidance on which approach(s) provide the greatest ROI for your bottom line.

Reduce the company footprint and embrace flexible work schedules.

Involve people at all levels of an organization to explore progressive work arrangements, which may include closing office locations and flexing work schedules to ensure most or all positions remain secure. Practiced over time and embraced by the entire company, alternative work arrangements can produce significant cost savings.

Reassess and refresh benefits to reduce expenses while retaining top talent.

Certain benefits, such as public transportation stipends, meal stipends, and gym memberships, may no longer be needed when employees have alternative work arrangements. Eliminating unused or less desirable benefits may substantially reduce costs, while improving employee productivity, performance and morale. For example, consider leveraging pre-tax purchasing for equipment, computers, desks and chairs to facilitate a comfortable and practical home workspace for each employee. Similarly, optimize pre-tax purchasing for tools designed to improve operational efficiency and collaboration, such as Google suite, Microsoft suite, Slack, Zoom and Skype. You should also consider offering a childcare tax credit to offset expenses incurred by working parents who are grappling with how to keep their children entertained and occupied during the workday. This is especially beneficial in the holiday and summer months when distance learning classes aren’t in session. If eligible, your business could provide up to $5,000 in childcare assistance to each employee.

Allow employees to volunteer for unpaid leave.

Many employees will jump at the opportunity to take an unpaid vacation, especially if it will help the organization get back on its feet. For example, the airline industry has suffered most significantly from the pandemic-enforced travel restrictions, so United Airlines and Virgin Atlantic have asked their teams to volunteer for unpaid leave. In some instances, such as if an employer forces their teams into unpaid leave, employees may qualify for temporary unemployment benefits.

Consider employee hours and salary reductions–starting with senior management.

Shortening the work week can cut costs significantly, and if you must cut salaries, start from the top down. Many CEOs from Fortune 500 companies, including the Walt Disney Company, Lyft, Airbnb, Delta Air Lines, United Airlines and Marriott International, forfeited their paychecks until 2021. For the rest of the staff, keep wage reductions to 5% so it doesn’t devastate your employees financially. From a legal perspective, you need to make these cuts evenly across the board for employees in comparable positions.

Eliminate employee nonessential luxuries.

Reduce overtime and sick pay. Institute hiring and pay freezes, including employer retirement contributions, bonuses and raises. Postpone nonessential technology, subscriptions, tools and equipment upgrades, seasonal celebrations and other performance incentives.

Layoffs take an emotional toll on everyone involved, from the affected staffers and their families to senior leaders and the employees who remain (and who might be on the chopping block for the next round of layoffs), so they should only be considered as a last resort. Be diligent in evaluating all alternatives and assessing the pros and cons of each to design a cost-cutting strategy that’s tailor-made for your organization.

Heyke Kirkendall-Baker brings more than 25 years of experience in human resources and employment law to her current role as president and co-founder of Parity Software, a pay equity solution provider based in Portland, Oregon. Parity Software is an automated, on-demand, cloud-based solution designed by HR professionals for HR professionals to ensure employees are earning compensation that is internally equitable.

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