Finding Alternatives to Layoffs

Quick Summary
As the owner of a mature business, no one knows better than you that payroll expenses take up a significant portion of your company’s overhead. During the most recent economic recession, many employers laid off workers as a way as to keep their doors open. However, if you’re facing a business downturn, there may be alternatives to layoffs.
Depending on your business operations, your business environment, and your long-term game plan, you may want to weigh these alternatives. Understanding their pros and cons, as well as their legal implications, is essential to finding the best option for your business needs.

Work Share Programs

Supported by federal and state legislation, Work Share programs, also known as short-time compensation, are offered by more than half of U.S. states. These programs offer employers an attractive alternative to layoffs. Plus, when employees’ hours are reduced, their reduced wages can be supplemented by unemployment compensation.

Furlough Options

Employee furloughs (time off without pay) can be set up on either a mandatory or a voluntary basis. You’ll need to research your state’s employment laws regarding any mandatory treatment of your employees’ benefits during a furlough.

Reducing Hours

Another way to pare down your business’s employee compensation costs is to reduce the total hours worked by all employees. This may make more sense with nonexempt (hourly) employees, as salaried employees may lose their exempt status if their hours are cut.

Modifying Pay

You are generally within your rights as an employer to reduce your hourly employees’ wages, as long as you meet your state and local jurisdictions’ minimum wage standards. As for salaried employees, you should pay careful attention to how a pay cut may impact their exempt status. With any pay cut, you’ll also need to contend with employees’ morale issues.

Early Retirement

As with voluntary layoffs, having employees voluntarily take early retirement can reduce your business’s overhead – and have less of an impact on employee morale. However, there are short-term costs to your business, namely, the financial incentives used to encourage employees to retire early.
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