Alternatives to Laying Off Employees

Guide
Layoff

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Many employers, stressed as a result of the difficult economy, are considering whether it will be necessary to lay off employees. Before taking this step, consider other alternatives that may accomplish the organizations’ economic goals, while avoiding the devastating impact of a layoff on an employee’s life.

There are many reasons laying off employees should not be an employer’s first choice during rough times. Good employees may be lost through lay off. Often the productivity of the remaining workers suffers because of the stress generated by their co-workers’ layoffs, uncertainty about their own jobs, and increased workloads. On the other hand, employees who see their organization trying to save their jobs by implementing alternatives to reductions in force, often become more loyal and productive.

Alternatives to consider include:

Restructuring

Review and evaluate the structure of the organization and how it goes about doing business. Has the organization strayed from its primary purpose or goal and diverted time and energy to unnecessary matters? Reassessment of the way the organization—or individual departments—operates can lead to streamlining processes. More efficient processes save money. Restructuring may, in the long run, mean fewer people, but the changes are more in line with the organization’s goals than are the changes made during a layoff.

Attrition

As employees leave the organization, allow remaining employees to share the available work. In a difficult economy when jobs are hard to come by, voluntary attrition due to employees quitting to take a job with another company declines. However, there may still be some attrition due to promotions, transfers, retirements, or terminations for cause.

Shortened Workweeks

Reduce the number of hours employees work in a workweek, which spreads the economic impact among the employees. Watch out for these issues:

  • Reducing the salaries of exempt employees working a shortened workweek raises wage and hour issues, but may be permissible under certain circumstances. Consider full week reductions for exempt employees.
  • Employees may be eligible for a partial unemployment benefit if their workweek (and therefore, their pay) is shortened significantly. If the employees’ workweek is reduced from 5 days per week (40 hours) to 4 days per week (32 hours), it is unlikely they will be eligible for a partial unemployment benefit.
  • Eligibility for health care coverage and other benefits may be affected as a result of shortened workweeks, if the employees no longer meet the eligibility requirement of the plans.

Rolling Layoffs

This is another method that spreads the impact among all affected employees and involves laying off employees for short periods of time (a week or two) one after another so that the business can continue to operate. Employees will likely be eligible for unemployment benefits for the week(s) they are laid off. Because a salaried employee does not need to be paid for any week in which he or she performs no work, this method works well for exempt employees.

Voluntary Reduction of Hours

This alternative can range from offering employees the opportunity to take a couple of unpaid days off to asking if any employees would be interested in volunteering for longer layoff. Often there are employees who welcome the opportunity for extra time off, whether it is to take care of family responsibilities, to study, to heal, or to take a vacation.

Early Retirement Packages

This allows employees who are at or near retirement, and may already be considering retirement, an incentive to leave the organization. Most early retirement offers include a severance package that is based on annual salary and years of service with the company, for example one week per year of service.

Even if a layoff eventually becomes necessary, employers who have considered these and other creative alternatives will have maximized their chances of success during an economic downturn and minimized their legal risk, while gaining the respect and loyalty of their employees.