5 Ways to Cut Labor Costs Beyond Layoffs

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With the extreme challenges presented by the recent recession, thousands of businesses have resorted to employee layoffs in order to stay afloat. However, making such drastic cuts to your staff, particularly if the company is small, can hinder employee productivity and morale.

Before you take this big step, you should consider many of the ways that could significantly cut costs. These effective options include: salary freezes, pay cuts, furloughs, unpaid vacations, mandatory holiday shutdowns, flexible work schedules, telecommuting and reductions in pension and healthcare plans.

Salary Freeze or Reductions
Numerous companies have effectively used a temporary salary freeze to decrease labor costs. Although this puts raises or promotions on hold, you can offer encouragement that the salary freeze will be lifted once business improves. According to a recent Watson Wyatt survey, salary freezes have already reached their peak. More than 67 percent of employers are not planning to utilize this option again this year (PRNewswire, April 2009).

If that doesn’t quite lighten your financial burdens, you may need to move to apply pay cuts for specific departments or across the entire company. In some cases, workers are buying into this strategy willingly. At Brandeis University, more than 30 percent of the school’s professors volunteered to take a 1-percent pay cut in order to help save jobs (NY Times, December 2008).

Unpaid Vacation Time
It may be enough to make smaller cuts to vacation benefits, such as limiting carryover hours from year to year. You can lower the vacation balance of each employee by just a day, and end up reducing a large amount of operating costs. Many small businesses have resorted to unpaid vacation time, as a last effort before downsizing their staff. Also, there is the possibility of voluntary or enforced furloughs. In such a case, you would select a handful of employees to take a set number of unpaid days, weeks or months out of the office.


John Anderson: John, a luxury travel blogger, provides reviews of luxury resorts, tips for planning upscale vacations, and insights into travel trends. His blog is a go-to resource for those seeking the finest travel experiences.

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