Is Forced Time Off the Right Cost-Savings Solution for Your Company?

As more and more employers are looking for ways to save money in today’s economic crisis, many are reaching a decision to implement an “unpaid time-off” program. There are pros and cons to this decision – from both the employer and employee perspective. If your company is considering such a program, the article below will be worth your time and consideration. The questions asked will help you evaluate if ‘forced time off’ is a viable solution for your firm, or not worth the potential risks.

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Is Forced Time Off Fair?

March 16, 2009 , Tom Davenport, Harvard Business Publishing

One of the common approaches to dealing with this recession is for companies to ask — well, tell — employees to take time off without pay, a day every week or two. This 10 or 20% haircut is supposed to indicate that “we’re all in this together,” and that it’s better for everyone to suffer a little than to lay some people off.

While I have some sympathies with this philosophy, I’m not sure it’s either fair or wise. On the issue of fairness, if such a policy had been instituted in 1969, it might have been very fair. But in 2009 there is much less of a relationship between hours on the clock and work actually done, at least for knowledge workers. How many of you reading this post actually work only 40 hours a week? How many of you only work on official workdays? Today, most people have a continuous mixture of work and non-work activities, and it will be difficult for any knowledge worker to stop working for a day every week or fortnight. I might suggest that this is exactly what the employer wants, but that would be a cynical remark.

There is also the issue of whether the forced haircut is wise. I have problems with its wisdom in two respects. One involves the fundamental principle that all employees are equally valuable. It’s nice to pretend that they are, but we all know they’re not. Giving all employees a haircut may lead the most valuable ones to look elsewhere. There was a column in a recent Boston Globe about treating all employees (at Boston’s Beth Israel hospital) alike with regard to cuts. It’s heartwarming, but if it leads to an across-the-board haircut, might some of the best employees leave for wealthier hospitals across town?

The other potential problem is that employees, given an involuntary time chop, may look elsewhere to fill the void. They’ll freelance, e-lance, or moonlight to replace the lost income. This could lead to a variety of negative scenarios for the employer/barber who originally chopped their time. The employee might find the freelance employer more desirable, and jump ship altogether for full-time employment there. Or he might end up doing a bit of his freelance work while ostensibly on the clock for the 80% or 90% employer. I’m not saying that 10 or 20% haircuts for everyone are necessarily a bad idea. I do think, however, that they are hardly a no-brainer either. The inclination to share the pain is admirable, but it could open the door to a host of problems.

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Employee Retention and Why it’s Critical for Small Businesses

Strategic Growth Concepts is pleased to present articles from time-to-time written by Human Resource related experts.  Our first article is from LaToya M. Palmer, an HR professional with  over 10-years of extensive experience in all aspects of Human Resources. She is President of the Michigan-based consulting firm, Palmer Solutions, LLC., which specializes in innovative HR solutions while also providing creative benefit management and payroll administration services.

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Many small to mid-size companies are ‘battening down the hatches’ during these economically tumultuous times. Major cost cutting efforts, re-organizations and layoffs are foremost on their lists of things to do. Unfortunately, employee retention in smaller organizations often times takes a back seat to financial concerns, mainly because business owners, already cash strapped, associate retention efforts with cash.  They are so busy watching the company’s coffers that they have taken their eyes off the most valuable asset, human capital.

Employees are getting lost in the shuffle at many companies when it comes to retention. Employers are counting on the fact that due to the turbulent economy, employees are “lucky to have a job.”  This may be true, however ‘when times start a’ changing’ these companies are going to experience a mass exodus of their top talent going right out the front door. Those forgotten stalwarts that were the bedrocks during the down times will be the trailblazing their way to companies that believe in retaining their top talent.

There are several cash-conscious ways to ensure that you are keeping an eye on the pulse of your organization:

  1. Communication: There is no such thing as too much information. You should be communicating to your employees in a constant regular stream. In our technologically advanced society, you can be cutting edge and use things like Twitter, blogs or your internal company website to keep employees informed about the business. There is also still credence in company newsletters and employee meetings.  Utilize different touch points to let your employees know that you want them to have a stake in what’s going on in the company.
  2. Employee Surveys: Companies should not be waiting for exit interviews to find out if there is a problem in their organization that needs to be addressed. By conducting semi-annual pulse surveys, and having strategic plans to make use of the information, companies will actively show employees that they value their opinions.
  3. Reward Employees: Many of you are sighing after reading the “reward your employees” header. Don’t sigh just yet. There are many ways you can reward employees without necessarily spending boatloads of money. So many, in fact, that people have written many books attributed to celebrating employees without spending much money. A few titles that stand out are: “1001 Ways to Reward Employees” by Bob Nelson, Ph.D; “301 Ways to have fun at work” by Dave Hemsath; “Managing to Have Fun: How Fun at Work Can Motivate Your Employees, Inspire Your Coworkers, and Boost Your Bottom Line” by Matt Weinstein.

You want your employees to be at your company because they are treated as stakeholders. Keep in mind, as business owners, for the long-term it helps our profitability to show our employees that they are valued through our actions and with our words, and translates to bottom line growth with low turnover rates and high marks for employee satisfaction.

Financial Impact of Layoffs on a Small Business

With all the downsizing and layoffs in the last year or so, I’ve started to think alot about the effects on small businesses who have been forced to layoff employees.  While these layoffs are typically not as publicly known, in many ways they can have a much higher level of impact. 

The first impact that might be felt is that of the U.S. economy overall from the collective small business layoffs since small businesses are  responsible for between 70% and 80% of U.S. jobs.  With small businesses being at the forefront of the banking trauma going on in recent months, its a safe assumption that they’re having to layoff employees in substantially higher percentages than their larger counterparts.

The second impact, is the effect on each individual small business.  I often wonder if the small business owner really analyzes the big-picture effect of an employee layoff from a financial standpoint prior to making the decision, or do they just think about the actual cash outlay for payroll?  A recent article I read in the Effortless HR Blog lays this analysis out in a very logical, easy-to-understand methodology.  You can read the article by clicking HERE.

After reviewing the article, I challenge all small business owners who are considering a layoff to do some additional analysis before making your final decision.  Make sure you’re thinking thru the additional tasks you will personally have to take on that may prevent you from making sales, which in turn could have an even more adverse affect your firm.