Economic Alternatives to Slashing Employee Payroll

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq.

Nina L. Kaufman, Esq., owner of Ask The Business Lawyer, is an award-winning business attorney, speaker, and Entrepreneur Magazine online contributor. She saves consulting and professional services companies time, money, and aggravation by serving as their outsourced legal counsel.

Posted on November 1, 2016 in Employee Issues

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In tough economic times, it’s tempting to look at payroll and ask, “Who can we cut?” It’s like looking in the mirror, realizing that you’re overweight and immediately choosing liposuction as a fat-reduction measure. There are alternatives to drastically cutting your work force–especially as these are the very people you will need to rebound when times improve. See if any of these creative ideas can be applied to your company:

  • Tighten your belt. You hear the heroic stories of the small band of loyal employees who took a pay cut when times were tough and were amply rewarded when things turned around. If each role in the company is indispensable to your functioning smoothly, speak to your employees to see whether they would be willing to accept a 10 percent to 20 percent pay cut for the time being. You may find that people would rather earn a little less than be unemployed altogether.
  • Reduce expenses by going virtual. Sometimes, it’s not so much the employee costs; it’s the other costs of “housing” them that add up (such as rent, utilities, IT infrastructure). Have a good, long look at your overhead expenses to examine whether your company could “go virtual” with a network of home offices, move into smaller space and/or use Web 2.0 tools for greater efficiency.
  • Outsource certain business functions. Yes, this is the one that may mean cutting staff, but it doesn’t mean you have to cut productivity. It’s often the roles that don’t involve a lot of face time with customers that can be outsourced effectively–such as accounting, marketing and administration. And outsourcing doesn’t have to mean sending the work over to India (or outside U.S. borders): You may find virtual assistant firms right in your neighborhood that would be delighted to help at a price below your employee plus overhead costs.

Whatever method you choose, be sure to speak to your employment attorney so you address the situation without stepping into any discrimination-related legal cow pies.

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