How Can a Company Avoid Layoffs and Still Reduce Labor Costs

Companies around the globe are firing employees as a result of the economic downturn, a decrease in e-commerce activity, declining revenue, etc. And if you run a business, downsizing may have crossed your mind recently as well. But did you know, laying off employees can actually be avoided while lowering labor costs? 

Beginning with big corporations, these merciless layoffs have also entered the world of startups. Every other person is worried if they are the next to receive the layoff email.

And reducing the number of employees harshly can have damaging downstream impacts on your business. 

So sit tight, take out your pen and paper and start jotting down the smart ways that can help you in lowering labor costs while retaining employees.

But first, let’s discuss the consequences of downsizing, which will help you clear up your mind.

How Layoffs Can Impact a Business

Downsizing or layoffs are common practices seen when the economy and/or company is struggling financially. In this situation, cutting down on the number of employees is a common practice.

However, this step is taken without considering the consequences it can have on your business and remaining employees.

Loss of knowledge and experience:

The company invests a lot of time, money, and resources in hiring and training employees. During their tenure, staff members learn various things, acquire knowledge, and share their new and innovative ideas. In short, employers and employees, both play their roles in the smooth functioning of a company.

But when a reduction in force takes place, a business not only loses a staff member but also knowledge, experience, and expertise.

Furthermore, downsizing companies typically do not recruit new employees, resulting in a void rather than a replacement.

The remaining employees get overburdened by the increased workloads and pressure:

With the reduction in staff members, remaining employees get pressurized to not only complete their own tasks but to take over additional work. This is the way to compensate the terminated workers.

As a result, the remaining employees are punished for the employer’s fault, thus negatively impacting the team’s morale and motivation.

Stagnant work environment and high attrition rates:

Overburdening current employees leaves little or no time for them to learn a new skill or broaden their knowledge base. Furthermore, they have no time for their families or personal lives. 

This not only creates an uncompetitive work environment but also leads to, remaining employees leaving the company voluntarily.

Thus a great jolt for the company.

Layoffs harm the company’s image and reputation, resulting in employee’s lower performance:

Removing a certain number of staff members from the company is not the end of the story.

When an organization opts to downsize, the remaining employees lose trust in the company.

They start feeling insecure about their jobs knowing that their company can any day layoff staff members to cut costs. 

Furthermore, it also affects their performance.

It badly affects the company’s relationship with its clients:

Any organization works hard to make a strong base of long-term clients. The customer experience will suffer if fewer people are employed to handle clients and their accounts.

Furthermore, if clients had a positive working relationship with an employee who was then terminated, they may be dissatisfied with the new person assigned to their account. These annoyances may lead to a drop in profitability and satisfaction among customers.

You’re probably curious about how to avoid downsizing, now that you’ve learned how it can harm your business. Here you go.

How Can Your Company Avoid Layoff in the First Place?

Try these strategies for keeping your business running with your employees — and becoming a success story in difficult times.

Instead of investing in extra perks, cut back on them and invest in employees:

Companies offer numerous perks to employees and potential hires in order to increase employee engagement.

Members have access to a variety of membership cards, exclusive events, lavish team-building activities, and even office food and beverages. All of these are the key contributors to non-essential company spending during the recession.

Although perks are appealing in normal circumstances, job security is a far better offer. When cutting costs, the first thing to let go of is the “nice-to-haves.” Instead, use this money to improve customer retention and your workforce.

Invest in a smaller office, or go completely remote:

Maintaining the office, types of equipment, and everything else becomes expensive, and prices in major cities have risen the most. Rather, try going for a smaller office or headquarters outside of the city.

You can also go completely remote. An alternative that is being used by a number of businesses, with positive results.

Employees are happier and more satisfied when they work remotely, according to surveys, which increases their productivity by about 13%.

And the best part is you don’t have to invest your time and energy in interviewing and hiring people remotely. You can easily get this work done by using the BookMyTalent website.

This not only saves you money, time, and energy but also helps you tap the global talent pool.

Resort to the temporary reduction of the salary of employees:

The idea of reducing salaries may not appeal to everyone, but most employees will prefer to keep 80% of their salary over nothing.

However, before making a decision on your own, communicate with employees in a transparent manner. Tell them how much you need to save and then ask each employee to decide how much they can reduce their earnings, giving them some control.

Reduce working hours:

It is preferable to introduce four-day workweeks or shorter shifts rather than fire all employees. By reducing working hours and days, you can ease the financial strain and keep everyone employed. 

And here as well, you will have to communicate with your employees about why are you thinking of doing so. Ensure that everyone in your organization is informed and that you are accommodating their needs and requests.

Stop the hiring process for a period of time:

Hiring costs should not be overlooked. Even with a successful hire, there are onboarding costs and new salaries to consider, which add up to significant expenses you should avoid for a while.

Final Words

Ups and downs are a part of life and when running a business difficult times come and go. But one of the most important things that you as a business owner should have in mind is looking after your employees.

They are your biggest assets and when treated with love and respect they will go to any extreme to save your company. Because they may not remember what actions you took but they will for sure remember how you treated them.