There are instances when companies must take drastic measures, such as downsizing or redundancies, to save their businesses from failing. Employers frequently downsize when faced with corporate restructuring, resizing, mergers, relocation, or buyouts. Layoffs are also prevalent amid financial crises, such as the current COVID-19 outbreak.
However, there are certainly better options than layoffs or downsizing if businesses want to retain those loyal and skilled employees on board.
Before moving ahead with the article to find the best alternatives of employee downsizing, let’s learn what downsizing is and how it works.
What Is Downsizing?
Downsizing is when a firm fires a large number of people at once to turn a profit. Downsizing, unlike termination for cause, is usually the result of company conditions overall rather than any behavior on the worker’s side.
How Does Downsizing Work?
Throughout a downsizing, some employees are generally notified that they will be laid off. Typically, these are final layoffs, but the employees may be hired back following a restructuring phase. Layoffs are frequently followed by additional changes, including branch closures or department mergers.
After a firm downsizes, there may be adjustments in the day-to-day activities of the remaining workers. Many staff may have to take on additional duties as a result of the reduced workforce.
Finding a Job after Downsizing
Contact your corporation’s Human resources department once you’ve been laid off to discover what benefits you could be eligible for. As you begin your job hunt, you should simultaneously file for jobless benefits. The federal government funds dislocated worker initiatives that provide job hunt and training assistance.
When looking for employment, if you are a displaced worker who was dismissed due to corporate downsizing, you should describe your situation. Since it is due to events beyond your control, getting laid off differs from being fired. Once you apply for a job, companies should be aware of this disparity.
Best Alternatives of Employee Downsizing
Melvin Scales surveyed 268 top company and HR professionals and discovered that 22 percent usually offer relocation before making job cuts, while 29 percent do it sometimes. To assist improve income, several companies are repurposing underutilized employees into customer-facing jobs like sales. Rhino Foods, which manufactures the cookie dough for ice cream, transferred 15 of its manufacturing workers to Autumn Harp, a neighboring lip-balm maker, for a week to assist with the Christmas demand. Autumn Harp was billed for the hours performed after Rhino paid the staff.
Furloughs and decreased hours are being used to minimize payroll expenditures
The premise behind unpaid vacations, often known as furloughs, is that by spreading the pain of a downturn throughout the staff, a company may retain outstanding people, gain more loyalty, and a good spot for recovery. Layoffs are also less expensive than severance pay. For example, during the 2009 economic crisis in China, accounting firm Ernst & Young allowed its 9,000 onshore and Hong Kong workers to take one week of low- to no-pay vacation to cut operational expenses. About 19% of the firm’s inspectors opted in, resulting in a 17 percent reduction in payroll expenses.
Pay reductions and pay reductions with incentives
Companies can use a pay decrease as an alternative to shrinking staff while lowering labor expenses and retaining employment. However, this option may negatively impact, as pay cutbacks may leave lasting emotional wounds and harm employee morale. Poor management can lead to decreased production, which in turn raises labor expenses. Many firms have adopted salary cutbacks, including Winnebago Industries, Inc. Due to the present crisis, Winnebago enacted a tiered compensation decrease for its CEOs in February 2009. According to the WSJ, Winnebago Inc. CEOs received a 20% salary decrease, while other top executives received a 10% pay cut. The compensation of all other salaried employees was cut by 3%.
Employers might also adopt wage cutbacks with bonuses to reduce the negative impact. Employers can, for example, encourage employees to take up to a year of unplanned sabbaticals and allow them to trade a portion of their salary for company shares.
Levels of defense
This version has a few levels to it. The first level or outermost level involves employment freezes and spending cuts. The second stage entails converting much staff to four-day working weeks and phasing out temporary and contract personnel. The third ring involves job cuts, factory consolidation, and salary freezes. The third option, which should be taken if sales continue to decline, is selling assets and reducing salary, perks, and R&D investment.
Work-sharing is indeed a state-based scheme available in 18 countries, namely Belgium, Netherlands, France, Germany, Italy, the UK, Switzerland, and many American states. Allowing companies to decrease work hours to claim unemployment benefits to restore a portion of their employees’ lost income is known as work sharing. Although the rules and payouts vary, most businesses must maintain healthcare and pension benefits and obtain clearance from organizations or third parties involved.
Offering remote/telecommuting employment or relocating to a smaller workplace
To be competitive in the market, distant and remote work is now a corporate need. This is also an excellent way to save money on things like electricity and building costs. Remote or telework is also a viable option for avoiding layoffs. However, some companies may have worries about the security of corporate data, fear of reduced productivity, and, in certain cases, a lack of confidence in employees while applying this method.
Downsizing a business is never a pleasant experience. When a firm decides to reduce its workforce, it affects everyone in the organization in some manner. Aside from generating joblessness for some, it also results in reorganization and a shift of responsibilities for others. Downsizing is always a difficult option for business companies to make. Downsizing is usually done when a firm makes substantial adjustments to either improve the firm’s value or save costs.