3 Alternatives to Layoffs

Through the pandemic and other changes, leaders of small businesses have had to make some tough decisions in the face of financial hardship, not the least of which is how—or if—to keep your current workforce on the payroll. Do you maintain every employee and try to power through, or do you implement a reduction in force—otherwise known as a layoff? We want you to know, there are alternatives to layoffs.

Though it may seem like these are your only choices, there are other ways to weather this crisis and still decrease your business expenses—without having to let go of your valued employees. Here are three alternatives to layoffs to consider:

Alternatives to Layoffs

1. Voluntary time off

• Voluntary unpaid time off is a viable way to save cash. You can offer voluntary unpaid time off to employees and still give them the paid time off they’re owed once normal business operations resume. This is a good option for employees who can afford to take a few days or even a week without pay.
• Voluntary paid time off is is another option that works well when the workload or business hours have been reduced. You can ask some employees to take voluntary paid time off, and when normal business operations resume, they can return to their normal workload and hours. Some employees may benefit from and agree to take a sabbatical, which can extend anywhere from a few months to a full year, unpaid. It allows employees time off to pursue a degree, do research, or otherwise further their expertise in a certain area, or to simply reduce stress.

2. Involuntary changes

During a time of financial uncertainty, a hiring freeze can help you refocus dollars and resources on mission-critical tasks and issues only. You can eliminate the costs of advertising, interviewing, onboarding, and training new employees, as well as wages and benefits for new hires. You save money and can keep your current workforce intact.

• Cross-training employees may be a necessary step if new and important positions go unfilled during a hiring freeze. Consider training existing employees to do other tasks that would otherwise get left undone, or merge roles so that some employees take on additional or different tasks. During a crisis, many employees are willing to adapt and be flexible, especially if they know their jobs are secure for the time being.
• Limiting overtime is another way to cut costs. Though there are some legal requirements around paying overtime to exempt (salaried) employees, one way to reduce overtime is to ask those employees to notify their managers in advance if they think they’ll need additional time to complete normal daily tasks. Managers can then determine if the overtime work is absolutely necessary or if the work can wait for another day or week.
• Reduce pay of hours can also decrease business expenses, since many employees may feel that working in some capacity is better than not working at all. Just be mindful that reducing hours to less than 20 per week could affect health care coverage and other benefits. And make sure that if you reduce pay for non-exempt (hourly) employees, you’re still meeting state and federal minimum wage requirements.
• Furlough is another tactic which is forced unpaid leave. Though employees receive no pay while on furlough, they’re assured the ability to return to work once the market picks up again, and usually with continuity of benefits. You can implement a furlough for all employees or only non-essential staff, and specify a length of time, such as one day per week, one week per month, or an entire month. During a furlough, a “no work” policy is imperative; that means no emails or calls to action that would require you to pay employees for the work.

3. Voluntary departures or separations

You can offer voluntary retirement to some of your employees, which would allow them to transition into retirement at an earlier age and allow you to right-size your business without having to conduct layoffs.

Some employees may be willing to voluntarily separate from your business, which means choosing to leave your business on their own without having to be laid off. This could work well for any employees who were considering leaving in the near term, want to relocate, or are simply looking for a job or career change.

Alternatives to Layoffs—What’s Best For Your Business

These alternatives to layoffs give you a number of ways to reduce your cash output, save business costs, and retain as much of your workforce as you can. But it’s still possible that once you’ve exhausted all possibilities you may still need to reduce your staff.

To learn more about the alternatives to layoffs outlined here, as well as what to do if you feel a layoff is imminent, download the comprehensive guide below.