Decreasing Labor Costs Without Layoffs
At a time when
the nation’s economy is softening, and perhaps worse, many organizations are
considering layoffs as a way to cut costs.
But eliminating jobs does not always result in immediate cost-savings.
There are often severance packages to finance and unemployment benefits to
cover. In addition, the morale of
the employees left behind always suffers.
There are ways to
decrease labor costs that can save jobs, however.
And, in many instances, these strategies can save money immediately, keep
unemployment insurance rates down, improve or at least maintain employee morale
and save jobs. You can also keep
the brain power, the talent that you have worked to recruit.
Here are a few options to consider before implementing involuntary staff
reduction.
Temporary
Staff: Utilization of temporary
staffing is often kept separate from regular human resource budget management.
But there are often many dollars to save here.
Temporary staffing agencies are charging a premium rate for each hour of
work performed. While it can
provide flexibility for the organization, it is often not an economic way to get
work done. And cutting back here
does not require payment of unemployment benefits.
As a result, this is a great starting point for etching away at the cost
cuts that are required.
Overtime by
Non-Exempt Staff: Do you have full time non-exempt staff who are working
overtime on a routine basis? Cut
out all overtime for a savings of 1 ½ times the hourly rate per hour of work.
Again, potential for great savings without cutting jobs.
Just be careful. You must
cut out the additional work hours as well as the pay.
You can not just eliminate the payment of overtime.
If non-exempt employees work the overtime they must be paid or you run
the risk of being non-compliant with the Fair Labor Standards Act (FLSA) .
Compensated
Overtime for Exempt Staff: Have
you negotiated special circumstances where you will pay overtime to some of your
exempt staff? Or are there certain
departments or job titles for which you pay above salary for additional hours?
Not only are you incurring additional costs, you are also putting the
organization at risk for losing the exempt status of these individuals.
Take a look at any special pay policies that you have for your exempt
staff. Use elimination of these
policies as an opportunity to save money and reduce the risk of FLSA
non-compliance.
Part time
Employees Working Beyond Normal Hours:
If you have employees who are budgeted to work 20 hours per week but who
routinely work 40 there is, once again, opportunity to save money without
eliminating jobs. Take a look here. This
is often a hidden cost. If you are
just looking at FTE (Full Time Equivalent) reports rather than actual hours
worked you may be missing the boat. Work
with your finance department and encourage them to look at dollars and hours
rather than just head-counts!
Per Diem or
Contingent Employees: If you have employees who have zero budgeted hours but are to
fill in where necessary it is, again, important to look at actual hours worked
rather than just head-counts. These
individuals do not represent budgeted jobs but may be consistently working 20,
30 or even 40 hours per week. In
addition, you organization may be paying a premium rate to individuals who do
not have guaranteed schedules. Cut
back here too to save jobs.
Voluntary
Reduction in Hours: You may very well have employees who would love to
work a reduced schedule. Ask!
Even if you can get a number of people to cut their schedules by only one
or two days per week, you can realize a great savings.
And, you have saved the jobs of people who the organization has invested
in to recruit and train. You have
not drained the brain power of the organization.
And taking this approach can improve employee morale.
You are working with employees and giving them a choice and some say in
their future with the organization. And,
you may be giving them the opportunity that they have been looking for, more
time for personal pursuits or family.
Allow
Employees to Job Share: This is a great win-win option. If you need to reduce the number of jobs in a certain area but
wish to retain full time coverage for remaining positions then job sharing is
definitely worth considering. In a
job share, 2 people work part time hours but in one full time position.
They provide seamless coverage of the job through communication with each
other. In a successful job share
clients, co-workers and the organization as a whole work with the team just as
if there were one person covering the full time job.
The organization has saved talent, continues to enjoy full time coverage
and is now enjoying the benefits of 2 heads rather than one to get the job done.
Consider
implementing or increasing telecommuting opportunities:
This option does not have direct labor cost savings but can help with the
indirect costs of labor; housing the labor and providing equipment.
If employees work from home the organization requires much less
office space on-site. Employee
offices can be converted into rotator offices utilized by multiple employees who
work on-site on different days. In
addition, in many instances, employees supply their own basic equipment for a
home office.
In the long run,
many studies also indicate that providing telecommuting as a work option will
increase productivity and decrease turnover.
This also results in cost-savings, as much as $10,000 per year per
telecommuting employee according to a study sponsored by AT&T.
We are facing
challenging times. Organizations need to be flexible and look long term.
Draining talent pools and lowering employee morale can alter the organization
over the course of years. Consider
some of these options as you create your labor cost reduction strategies.
The organization may very well find itself better off not only in the short-term
but down the road as well.
Kirsten Ross is mother of two sons and is
a Certified Human Resource Professional (SPHR) dedicated to helping women
achieve more life balance and to transforming the design of work.
Visit Womans-Work.com at http://www.womans-work.com
to search our revolutionary flexible work job board featuring more than 35,000
fresh work from home, part time, job share, flex time and telecommuting
opportunities, search for a job share partner or
read valuable career, life balance and family articles. You may also email
her at mailto:KRoss@Womans-Work.com
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