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  • Finding Alternatives to Layoffs

    Game Plan

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    Reducing Hours

    Reducing your employees’ working hours is a simple cost-cutting strategy in terms of execution. If your employees can afford the cut in take-home pay that results from working fewer hours, this strategy may offer the least long-term consequences to your business. Still, the big overarching concerns you’d need to consider are:

    • How will reduced hours impact your business operations?
    • How will this change affect your employees’ morale? Are they going to be expected to work harder in a condensed workweek?
    • Will reducing hours prompt your best workers to seek work elsewhere?

    As we discussed in the previous section on furloughs, the best way to approach any change in your work place structure is to communicate these moves openly with your staff. It can be very helpful to workplace morale if you make this a process your employees feel they’re part of — and if they understand the rationale for the change.

    Don’t overlook giving employees the option to voluntarily reduce their hours. In a similar vein, you can offer them the opportunity to take off a block of time without pay.

    Legally, cutting employee hours is well within your rights as an employer. But if you plan to reduce the hours of salaried (exempt) employees, you’ll need to pay attention to how this change will affect their exempt status. Since your exempt employees are paid a set salary no matter how many hours they work, cutting their hours obviously will not benefit your bottom line, as they’d still be making the same amount. If you negotiate with them to pay them less for working fewer hours, you may end up making things worse for your bottom line, as they may lose their exempt status and thus be eligible for overtime pay. Not an optimal strategy, to say the least.

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    Game Plan

    • When it comes to creating alternatives to layoffs, it can help to think creatively. For example, during the most recent recession, some employers “farmed out” their employees to other businesses as an alternative to reduced hours or layoffs. This article describes several of these alternative practices.
    • The Work Share program, described earlier in this article, is essentially a government-subsidized option for reducing employee hours. You can check to see if your state offers it here.
    • Here’s a link to a U.S. Small Business Administration article that discusses some of the legal implications of reducing employee hours.