No, firing employees is not the only way to cut costs. Here’s our round-up of six alternatives!
In April 2022, Tesla CEO Elon Musk offered to buy Twitter, and one of the top tasks on his agenda is slashing jobs to cut costs. Netflix, too, has been laying off employees to cut costs after losing over 200,000 subscribers.
If your company is undergoing a financial crisis, too, your initial recourse might also be to send your employees packing. That can have dire consequences, from subjecting your company to wrongful termination lawsuits to bearing the costs of severance pay, rehiring and more. It also puts pressure on existing employees and can reduce their morale, which might result in them quitting. And if that wasn’t enough, studies have found that laying off employees rarely produces desired results, economically or otherwise, for your company. Not only does it affect employee productivity but also your profitability. So, here are some ways you can cut costs without losing your employees (and here’s hoping, for the sake of Twitter’s employees, that Musk is reading this):
1. Review your current spending habits
Go over your current expenses and look at areas where spending is unnecessary or non-essential. It could be employee perks, like free gym memberships, or machines that are using up excess energy. Start by reducing costs there. Outsource whatever jobs you’re spending unnecessarily extra on and eliminate additional perks. Let this be a monthly or quarterly activity instead of a measure for desperate times. This way, you always keep your expenses within—and, preferably, below—budget.
2. Press pause on hiring new people
Instead of firing existing employees, freeze new hiring. For instance, Facebook’s parent company Meta recently slowed hiring for mid-to-senior positions to cut costs. The company shared in a statement, “We regularly re-evaluate our talent pipeline according to our business needs and in light of the expense guidance given for this earnings period, we are slowing its growth accordingly.”
3. Opt for salary cuts, temporarily
Instead of getting rid of employees, propose salary cuts for everybody in the organization, including yourself. Temporary salary cuts can help you save more money for the next few months while you figure out how to resuscitate your revenue streams.
4. Reduce work week or hours
Another way to go about saving money is by reducing employees’ working hours or days. The President and CEO of business advisory company The Alternative Board, Jason Zickerman, noted in an article that reducing your work week from five days to four can reduce payroll costs by 20 percent. You can also split working days among employees. For instance, if there’s a team of four employees, two of them could work from Monday to Wednesday and the other two could work from Thursday to Friday or Saturday. This way, you are able to reduce overall expenses.
5. Shift to remote working
That working from home can save your company a significant amount of money is well-documented (read: Covid-19). So, to reduce your overhead costs, encourage your employees to work from home. Given that it has been the way of life for two years now already, companies can rest assured that many employees will adjust to it comfortably. Additionally, a 2020 report found that businesses can save up to US$11,000 annually for every remote worker in their company. In fact, Google reported saving US$1 billion per year by pushing remote work! So it’s definitely worth a shot.
Ask your employees for ideas
Want to cut costs? Ask your employees to help you out! Get them involved in your endeavors. Do a quick survey to see what suggestions they have for making your business more efficient to reduce spending. You could also hold brainstorming sessions or a “hackathon”-like event, where employees come up with ideas for cost-cutting measures and make them a reality at the same time. This way, you get everyone on board as a team instead of looking at them as potential “expenditures”.
These are just some of the ways to help your business cut costs without losing your employees. What’s important is that you keep communication channels open with your team so that they understand the reasons behind the cost-cutting measures and remain motivated to help the company get through these tough times. Come what may, make sure laying off employees remains the last resort for your company.
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