Balancing People and Profits

Employers face tough choices during times of recession.  Often financial difficulties force a decision between reducing the workforce and remaining profitable.  Before deciding to eliminate jobs, keep the following considerations in mind:

· The Society of Human Resource Management has calculated that the average turnover rate for companies conducting no layoffs is 10.4%.  A 5% reduction in the workforce produces a 14.9% turnover rate, while a 10% reduction produces a 15.5% turnover rate.  Layoffs clearly trigger attrition among remaining employees.

· Additional indirect costs are incurred by layoff “survivors,” including reduced productivity and low morale.  Give remaining employees a reason to stay by articulating a vision for the future.

Some other ways companies have been able save money may include:

· Negotiate lower prices with several vendors.

· Reduce travel expenditures—try videoconferencing.

· Eliminate free beverages and snacks, company picnics or lunches.

· Encourage environmental awareness by turning off unnecessary lights, water office plants instead of paying a plant company, and eliminate unnecessary office supplies.

· Temporarily suspend a 401(k) fund match for the year, reinstating it in 2010.

· Try job sharing, dividing a full-time job into two part-time positions.

· Implement a high-deductible health plan, especially if the company can pay all or part of the deductible.

· Eliminate pay increases and reduce paid time off.

· Eliminate Blackberry and cell phone expense reimbursements.

· Offer early retirement or voluntary layoffs.

Asking employees for suggestions may yield some additional ideas.  While layoffs may still be necessary, cutting expenses in other areas may reduce the number affected. 

From Employee Benefit News, August 2009 issue, pp. 22-23, and North Bay Business Journal, August 3, 2009 issue, p. 23.