Highlights
- Before considering a difficult reduction in the workforce, employers should explore various cost-saving alternatives.
- Careful planning involves legal counsel and sensitive communication to minimize legal risks and avoid hurting employee morale.
- Empower HR helps you navigate workforce transitions with confidence, offering expert HR consulting and risk management; contact us today for support.
When economic indicators point toward a recession, employers need to strategically evaluate operational costs and efficiency. A reduction in the workforce is one of the measures some employers may choose to take, though this is a particularly difficult decision to make.
This blog delves into the strategies and alternatives surrounding a reduction in workforce, providing best practices for employers who may be considering or implementing such a transition. Carefully planning and executing is vital, not just to minimize legal risks but also to preserve company morale during challenging times.
Alternatives to a Reduction in Workforce
Before proceeding with a permanent reduction in workforce, you should explore various cost-saving alternatives, including:
- Hiring and wage freezes
- Postponement of wage increases
- Reducing fringe benefits
- Reducing company insurance premium expenses
- Reducing work hours with proportionate pay cuts
- Discontinuing the use of temporary and part-time employees and redistributing their work to permanent employees
Young businessman and businesswoman sitting at desk with office window in background and listening to their male colleague sitting back to camera
Whether you decide to reduce your workforce, implement early retirement programs, or take other cost-saving measures, it’s important to maintain sensitivity in all communications with your employees to preserve morale and trust. In fact, a key first step involves transparently explaining the company’s financial situation and seeking employee understanding and support whenever possible.
Planning for Workforce Reduction
Once it’s been determined that a workforce reduction is necessary, it’s the job of operations, human resources, and your legal counsel to devise a plan that minimizes the risks of litigation and ensures there is ample sensitivity and communication during the process.
Before taking any action toward reduction in force (RIF), consider these steps:
- Document the financial conditions necessitating the RIF
- Identify the goals of the staff reduction
- Identify the job functions and/or skills that are essential to successful operations
- Eliminate and/or consolidate unnecessary jobs
- Review limitations or liabilities created by collective bargaining agreements, employment contracts, etc.
- Consider using a RIF committee for evaluating positions
- Set a timetable for carrying out the RIF.
A reduction in workforce should never be used as a substitute for terminating employees who are performing below standard. As an employer, you must be sensitive in situations where a layoff coincides closely with an employee reaching benefit eligibility (e.g., pension vesting, retirement). Selecting employees based on age or higher salary can also be perceived as discriminatory and carries significant legal risks.
Consult with your legal counsel to understand all applicable legal requirements for a reduction in workforce. This includes state-specific and industry regulations, severance obligations, pension plan implications, collective bargaining agreements, and more. Specifically, discuss your RIF plan with legal counsel to ensure compliance with relevant legislation, such as:
- Older Workers’ Benefit Protection Act (OWBPA)
- Age Discrimination in Employment Act (ADEA)
- Equal Employment Opportunity Commission (EEOC) guidelines
- Worker Adjustment and Retraining Notification Act (WARN Act)
Communication Best Practices
Employees affected by a staff reduction should be advised of the reduction in workforce in a professional and supportive manner. You should be prepared to cope with employee shock, surprise, and inability to absorb every detail.
Here are a few best practices to handle communication:
- If possible, two members of management should meet with the affected employees individually.
- Communications regarding the company’s decision should be brief and direct.
- If asked, those communicating with the employees should be able to briefly explain the basis for the decision.
- The communicators should also explain the following:
- Recall/rehire rights, if any
- Severance benefits (if any), health insurance conversion rights, and other monetary issues
- Outplacement or other transitional services being offered, if any.
Focused female colleagues discussing and analyzing reports. Two professionals sitting together, holding documents, using tablet and talking. Teamwork concept
What Happens After a Reduction in Workforce?
Following a reduction in workforce, there are several key steps you can take to help both departing and remaining employees, while also maximizing the intended benefits of the restructuring.
As a gesture of goodwill and to support former employees in their transition, consider offering outplacement services to aid them in securing new employment.
For the remaining workforce, keep communication clear and timely, ensuring everyone understands the goals and expected timelines of the reduction in workforce. To bolster morale and encourage productivity, consider implementing modest incentives, both monetary and non-monetary, to recognize increased responsibilities and output.
Workforce reductions present a valuable opportunity to reorganize and streamline operations. To fully realize the anticipated cost savings, actively redesign existing workflows and operating procedures to enhance efficiency and eliminate redundancies.
Strategies to achieve this include:
- Job cross-training — Equipping employees with multiple skill sets to enhance flexibility and coverage.
- Restructuring — Optimizing the organizational chart to eliminate unnecessary layers of supervision and management.
- Evaluating business practices — Critically assessing existing processes to identify and reduce hidden costs associated with areas like travel, entertainment, and recruitment.
How Empower HR Can Help You Navigate Workforce Transitions
During sensitive and challenging periods, such as a reduction in workforce, having a trusted HR partner can be invaluable.
Empower HR is here to support your organization through these transitions. Our comprehensive services include expert HR consulting to help you explore all available alternatives, develop strategic plans, and ensure best practices are followed.
Furthermore, our HR risk management and compliance expertise will help you navigate the complex legal landscape, minimizing potential liabilities and ensuring adherence to all relevant regulations.
Contact us today to navigate workforce changes with confidence and care.