by Meridith Levinson

Cutting Labor Costs Without Layoffs

Dec 22, 20083 mins
IT Leadership

The New York Times has a story today about a trend that’s gaining steam: companies that are finding ways to cut their labor costs without laying off staff. Instead of handing out pink slips, some organizations are moving to four-day work weeks, instituting unpaid vacation time and getting rid of overtime.

These companies—which, according to The New York Times‘ article, include Dell, Cisco, and Honda, in addition to small and midsize businesses—are pursuing alternatives to layoffs primarily because they can’t afford to lose good workers. Many of them cut the riff-raff from their organizations in previous downturns and are already operating lean. The only employees those employers have left are their high-performers, and cutting them would be detrimental to their businesses. (Finally! Companies that realize the irreplaceable role their employees play in generating profits!) These organizations don’t want to be caught short-staffed if the economy rebounds as suddenly as it tanked, nor do they want to have to compete for talent when it’s time to hire, say sources quoted in the story.

What surprises me about this trend is that employers are pursuing these substitutes for layoffs as a competitive move and not as a humanitarian one. They’re not implementing these cost-cutting measures because layoffs are disrespectful and demoralizing. Nor are they applying them because they want to prevent their employees from losing their homes. Not one of the nine sources in the article said that employers were taking these measures to protect employees’ well-being. Rather, they’re implementing these cost-cutting strategies so that they’re not at a disadvantage when the economy rebounds.

The fact that companies put their bottom lines ahead of their employees’ welfare shouldn’t come as a shock to me, the self-proclaimed voice of the proletariat, but it does. It comes as a surprise and a disappointment. I’m disappointed that employers aren’t expressing more concern about the welfare of their employees during a recession that led to more than half a million job losses in November alone, and during a mortgage crisis that may lead to 2.2 million foreclosures by the end of 2008.  

Not surprisingly, employees are embracing these alternatives to layoffs, according to The New York Times.  I don’t know about you, but I’ll take a smaller paycheck over no paycheck any day.  

Though I’m disheartened that employers aren’t seeking out alternatives to layoffs because they’re concerned for their employees’ welfare, I’m encouraged that they’re getting creative. For too long layoffs have been the automatic, knee-jerk response when companies missed their quarterly plans; they see employees as expendable, disposable, as easily replaced as an oil filter on a Honda Civic.

It seems that mentality may finally be changing, after eight (or more) years of cost-cutting. If only one good thing comes from this economic crisis, it will hopefully be an awareness among employers about the true value of their employees and a sincere commitment to rewarding their loyalty and sacrifices when the economy surges again.