Crisis! What Alternatives can HR offer for Downsizing or Reducing Payroll Salaries?

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Human Resource Management Roles > Best Practices > Crisis! What Alternatives can HR offer for Downsizing or Reducing Payroll Salaries?

Crisis! What Alternatives can HR offer for Downsizing or Reducing Payroll Salaries?
Piero Rodrigo Casafranca Abrill, Analyst, Peru, Member
In times of crisis, companies make difficult HR decisions and often choose between downsizing or reducing payroll salaries, but really what is the best option? Are there other alternatives that can help a company's economic situation?

Options for HR Reductions
David Wilson, Manager, Canada, SIG Leader
You need to look at what the US Government calls a Reduction In Force (RIF). Options include:
- Buyoffs and early retirement (e.g. voluntary downsizing),
- Attrition (e.g. hiring freeze),
- Layoffs and dismissals (e.g. forced downsizing),
- Salary reductions (e.g. rollbacks),
- Elimination of vacancies,
- Reduced hours of work (e.g. 4 day work week versus 5 days),
- Reduction in benefits (e.g. lower costs),
- Transfers to vacancies to be retained,
- Unpaid leave of absence,
- Reduced vacations,
- No temporary staff
- No backfill of permanent staff.
This may not be a complete list, but they are options.
Layoffs should (in my opinion) be the last option. Please note, the specific terms used may vary from country to country.

Alternate Options for Reduction: Multiskilling
Leena Bissoonauth, Student (University), Mauritius, Member
I agree that layoffs are the last option, because in a crisis situation layoffs may lead to unemployment (and a loss of knowledge).
To reduce recruitment postings, companies facing difficulties may provide current employees with added training. By supporting multiskilling, employees are able to do a wider range of jobs, therefore reducing the need to recruit new employees. Another option is to retain knowledge workers who contribute to the success of the company. Companies can also outsource the services instead of taking casual workers.
Companies may also consider a flexible pay for executives and top management.

Options Solution for your Problem
SETIONO WINARDI, Business Consultant, Indonesia, Member
Even if downsizing is the only remaining option for the management of company, it must be followed by the development of a business strategy or diversification of the business. In this way, management can improve the business and that will also help the workers.

HR Reductions and Sustainability
F. Mouche
Perfectly right, David, and when eventually you are bound to lay people off, you can still try to do it in a positive way, such as helping your ex- colleagues to find a new job. The case study of Lafarge in Tetouan is quite a responsible way of looking after layoffs. For full explaination of the Lafarge Maroc employee-centred personnel redeployment programme, see here.

Decisions HR Take During Tough Times
Ashish Verma, HR Consultant, India, Member
There are 2 schools of thought during difficult times;
1. Downsize / reduce costs:
A. Pros: keeps your company buoyant and floating, forces attrition which churns the employees
B. Cons: there is a limit to downsizing and the company cannot go beyond a particular point, the process of downsizing is not developmental by nature
2. Alternatives: focus on lean / strengthen processes with focus on customer. Find alternate sources of revenue to sail through. Identify constraints that are detrimental to growth (theory of constraints) and eliminate those to build resources.
A. Pros: the process is developmental and has limitless opportunities
B. Cons: focused approach required, time consuming, requires accurate capture and analysis of data.

Multi Skilling in the Health Service Sector
OPIO SAM, Manager, Uganda, Member
@Leena Bissoonauth : I agree with you. In my organization, it has worked, especially the time the Ministry of Health restructured the department and lots of positions were erased, combined with a strong recruitment ban.
The few staff remaining went through multi skilling and that has solved the problem of several tasks that were unattended to.
But over time, the remaining staff got overworked, due to the an overwhelming number of programmes that one person needs to attend to. This may affect or compromise the quality of service offered.

Useful HR Options During Recession and Crisis
Jaymala dubey, Student (MBA), India, Member
@Leena Bissoonauth : I agree multi skilling is better option than layoffs and reducing extra costs is another good option.

Why Downsizing is not a Good Solution During Crisis
Alex Joe Nona, HR Consultant, Papua New Guinea, Member
I agree with David that during difficult economic times voluntary downsizing or other alternatives (such as attrition) should considered before reducing a workforce:
- Employees are human beings and if they are the most important assets of an organization, they should be treated with respect and not crushed emotionally.
- Organizations also need to remember that dealing with customers involves a lot of word-of-mouth communications. Current or laid off employees are more likely to comment negatively about the business to the public, neighbours, or customers if layoffs occur before other alternatives are considered.
- As a result, prospective employees may hesitate to apply to future jobs openings in your organization, which will potentially impact the success of your business.
- Moreover, the economical burden, nowadays, is insurmountable and everyone should be given a fair chance of life and work.

Resource Action - do your Homework First
Bill Maynard, SPHR
What is the crisis? Prior to determining what HR action needs to be implemented we have to understand what we are trying to fix. In most cases we have already stopped new hiring and implemented a process whereby open positions are not being filled. Are we creating more product than is being consumed? Is the product we are selling not meeting the needs of the market because it is outdated and unable to compete with the new technology?
All of these factors will determine the need for a Reduction-In-Force (RIF) and just who the RIF might effect. What is the company in business for, providing meaningful employment or a ROI for the investors. What tasks need to be completed in order for the company to meet the needs of its customers?
Remember if the company fails everyone looses their job. HR is in a unique position to influence the who and why the company will take the appropriate action.
We once laid off all of our programmers with a particular skill set, only to find out later that the skill set was critical to our success...

Special Interest Group Leader
David Wilson

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