Bottoms Up (Temporary) Pay Cut

I have shared a number of examples here lately of organizations asking their employees to cut back their hours to avoid lay-offs. Here’s a story from Jay Hargis’ blog, HRCleanUp.

Teachers and public employees in Lynn, Massachusetts have volunteered to work one day without pay to help the city avoid lay-offs. I love the bottoms-up approach. As Jay says, we really are all in this together. Hurray for the employees of Lynn!

Smart Companies Avoiding Lay-offs

There is an article in this morning’s New York Times that reports on a new trend in this recession: companies avoiding lay-offs by cutting back hours and benefits to their employees. This is happening across the economy, not just in traditional manufacturing. The Times reports:

A growing number of employers, hoping to avoid or limit layoffs, are introducing four-day workweeks, unpaid vacations and voluntary or enforced furloughs, along with wage freezes, pension cuts and flexible work schedules. These employers are still cutting labor costs, but hanging onto the labor…The rolls of companies nipping at labor costs with measures less drastic than wholesale layoffs include Dell (extended unpaid holiday), Cisco (four-day year-end shutdown), Motorola (salary cuts), Nevada casinos (four-day workweek), Honda (voluntary unpaid vacation time) and The Seattle Times (plans to save $1 million with a week of unpaid furlough for 500 workers). There are also many midsize and small companies trying such tactics.

This is a very smart strategy in the knowledge economy where your intellectual capital is your “factory” and where firing a productive worker is akin to selling off your production lines piece by piece. Companies with a strong labor force can use their employees smarts to cut other costs (see my thoughts on this here) and will be much better prepared when the recession ends.

Before You Lay Anyone Off

At a neighborhood gathering this past weekend, I chatted with a neighbor about his business. Because he is dependent on automotive sales, he is already feeling the pain of the current downturn. And he has already had to let go employees that he had valued but can no longer afford.

In my 25 years as a banker and consultant, I have seen many businesspeople in this position (and sometimes have had to help them make decisions about layoffs). Sometimes, this is the only alternative they have. But I want to take just a few minutes to tell you why you should think twice today about laying people off even when it might have made sense in the past. Read more