Look at Alternatives to Layoffs

By John Egan August 24, 2022
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Look at Alternatives to Layoffs

Layoffs are rattling corporate America.

In a survey of U.S. business executives by professional services firm PwC, 50 percent of respondents indicated that they were reducing their companies' headcounts.

Last month, 7-Eleven laid off nearly 900 corporate employees. Companies like Wayfair, Peloton and Ford announced plans to eliminate thousands of positions in August.

As of mid-August, the U.S. tech sector alone had shed more than 38,000 employees, a tally by Crunchbase News shows. And in a sign that it is slowing hiring efforts, Apple is laying off recruiters.

So, if employers are looking to trim costs, are layoffs the best way to go? Not necessarily, experts say. Alternatives to wielding the layoff ax are available. Here are five of them.

1. Furloughs

Furloughs can be a short-term way to avoid at least some layoffs, according to Jill Chapman, senior performance consultant at Insperity, a professional employer organization (PEO). This can save money without losing employees altogether, she said.

A furlough is a mandatory but temporary leave of absence. A furloughed employee works a reduced schedule or takes unpaid leave.

By contrast, a layoff involves a separation from employment when there's a lack of available work. The employer may anticipate more work will be available soon and may recall the employee. The word "layoff" often is incorrectly used as a substitute for a "reduction in force," when an employer lets an employee go and doesn't plan to bring him or her back.

[SHRM members-only HR Q&A: What is the difference between a furlough, layoff and reduction in force?]

2. Job sharing

Job sharing lets two employees share duties in a job that normally would be filled by one full-time employee.

"The hope of job sharing is to reduce hours, save costs and, ultimately, provide employees the ability to resume their normal work schedule once business improves," Chapman said.

[SHRM members-only Express Request: States' Shared Work/Work-Share Programs]

3. Pay cuts

Pay cuts can help prevent a business from bleeding jobs.

However, Chapman noted that this strategy can be costly for employees, particularly those living paycheck to paycheck amid high inflation.

"For this to be effective, there must be an agreed-upon, uniform cut percentage across the board. Though this will hurt in the short term, it is definitely a more stable alternative for both the employee and employer," Chapman said.

4. Cuts in benefits or perks

Aside from pay cuts, an employer might temporarily reduce benefits or perks to "buy the company some time" to turn around its finances, said Nicole Barra Conde, co-founder and chief operating officer of international online hiring platform Strider. Because Twitter hasn't met finance performance goals, the company announced Aug. 19 that employees might receive half the amount of their typical annual bonuses this year.

Mariko Paul, assistant general counsel and HR consultant at Engage PEO, said options for trimming benefits and perks include:

  • Eliminating corporate swag. While purchases of employer-branded pens, caps and T-shirts dropped off dramatically at the peak of the pandemic, sales activity is rebounding.
  • Charging for employee meals that had been free. But keep in mind that 58 percent of employees surveyed this year by corporate catering company ezCater cited free meals as a highly desirable workplace benefit.
  • Reining in high-cost travel expenses by, for instance, requiring executives to fly in the economy-class cabin instead of the first-class cabin. There's a cautionary note here: 40 percent of business travelers surveyed by BCD Travel cited sitting in economy-class seats on long-haul flights as a source of travel stress.
  • Relying on videoconferencing in place of business trips. It's worth noting that business travel is on the rise following a significant lull at the height of the COVID-19 pandemic. Still, 75 percent of business executives surveyed by Tourism Economics said virtual meetings are likely to continue in order to contain travel expenses.
  • Lowering or getting rid of the company's 401(k) match. SHRM research shows that 83 percent of employers contribute to traditional 401(k) plans and 76 percent contribute to Roth 401(k) plans.

[SHRM Resource Hub Page: Employee Termination and Layoffs]

5. Contract labor

Tim Rowley, chief operating officer and chief technology officer of PeopleCaddie, a digital talent marketplace for contractors, said a "proactive" alternative to layoffs is making sure your workforce features a balanced mix of contractors and full-time employees.

"As market conditions change, so does a company's need for labor. The modern corporation needs to be able to quickly adjust to rapidly changing market conditions," Rowley said. "Therefore, companies need to determine what the optimal composition of their workforce is between permanent employees and contingent labor so they have the flexibility to remain nimble and competitive." 

John Egan is a freelance writer based in Austin, Texas.

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