Terminations cost money, and while layoffs are intended to save the company money, the expenses associated with a layoff can add up quickly. While there are some instances in which layoffs are unavoidable, they should typically be considered as a last resort.

Before making a layoff decision, consider some of these cost-saving strategies:

Restrict overtime. You are required to pay all non-exempt employees overtime for all hours worked in excess of 40 in a given week. Overtime is payable at one and half times an employee’s regular hourly rate (and in some states, and under some circumstances, it’s two times an employee’s regular hourly rate). The extra expense of paying overtime can add up very quickly if you’re not keeping tabs on employee hours. Require your non-exempt employees to receive written authorization from their manager before working any overtime hours and instruct managers that overtime should be authorized only when absolutely necessary.

Limit un-necessaries. Take time to evaluate the areas in which you may be spending money unnecessarily. For example, do all of your employees need company-issued cell phones, laptops, or other similar equipment? Determine which employees would benefit the most from these types of resources before making blanket purchases.

Shorter workweeks & telecommuting. Consider flexible work arrangements, such as compressed workweeks or work from home programs, to reduce overhead costs. When more employees work offsite it means your facility can save money in energy costs, phone bills, and workspaces.

Cut hours. Rather than having your full-time employees work 40 hours per week, consider making full-time status 35 hours per week. Those working 35 hours per week would still be entitled to the benefits you already offer full-timers, but you’d save big. Let’s say you have 10 full-time employees, all making $10 per hour. Reducing the amount of time they work per week by 5 hours could easily save $500 a week! Although cutting hours is a great cost-saving solution, be sure to comply with FLSA regulations, especially if you are considering a reduction in hours for exempt employees.

Salary freezes. Consider foregoing any sort of pay raises for awhile. If you do choose to implement a salary freeze, be sure to do so in a consistent manner. Giving your managers and upper level staff members a raise, but not your other employees, will not be well received. If merit increases aren’t possible this year, let employees know the reason why and that you hope it gives the company an opportunity to offer raises next year.

Hiring freezes. Hold off hiring any additional staff members if at all possible. Cross-train existing employees to take on different responsibilities, rather than creating new positions. If you do need to bring on the extra help, use cost-effective recruiting methods, such as employee referrals and network contacts.

Increase premiums. If you offer group health insurance consider increasing your employees’ share of the premiums. Most companies pay 50%, but there is currently no requirement for employers to pay anything. Employees may not like the additional expense, but if it means that they’ll have some added job security, they may be open to the idea. You may also want to consider cutting employer contributions to retirement plans and other similar benefits.

Pay cuts. Pay cuts are another option, though they probably won’t be well received and should be considered after all other alternatives have been exhausted. If you plan to implement a pay cut, be sure to do so in a consistent manner and make sure that you comply with FLSA requirements, especially if you plan to reduce the pay of exempt employees.

Negotiate with vendors. We’re all having a tough time financially right now, your vendors included. You may find that now is an ideal time to re-negotiate vendor contracts. They don’t want to lose your business and they may be willing to lower their rates. Even if they can’t lower their prices they may be willing to throw in some additional services. It can’t hurt to ask!

Improve efficiency. Make sure you are getting the most “bang for your buck” by ensuring employees are as productive as they can be. Spend time developing employees’ skills, setting performance goals and working with employees to reach specific targets. And when employees meet those goals, don’t forget to recognize their achievements. Employees who are recognized for their hard work are often more satisfied and productive.
Before jumping into a layoff decision, consider some of the above-mentioned options to help your business cut costs. While there may be some instances in which a layoff is necessary, these cost-saving strategies may help to avoid the aggravation of having to make a layoff decision. If you ultimately determine that a layoff is the right decision for your company, be sure to review and comply with all federal and state laws regarding reductions in force, which vary depending upon the size of your company and the number of effected employees.

As a full service payroll processing company, we know the value of Accuracy, Time and Money. The ever changing world of Technology can help maximize these assets, but it can also hurt. That’s why it is of upmost importance to have the right balance of Technology AND Service. Too little or too much of one can tilt the service to an inconvenient and sometimes detrimental level.Many of our clients have come to us after experiencing extreme frustration with Payroll Services that do nothing more than provide a new and complicated software program to learn. Many times we have heard, “We did all the work, and all they did was push a button and collect a fee!”

Payroll Express understands these frustrations and challenges. That is why we have been careful to keep up with technology while never forgetting that we are truly providing a SERVICE. Each of our clients has a personal payroll specialist assigned to their account. This is a person that be contacted at any time with questions or concerns. Technology can’t tell you what to do with an IRS notice, or direct you with unique situations that inevitably arise in business. However, technology can help by providing convenience and flexibility in Submitting, Processing, and Receiving your payroll. Payroll Express has just launched state of the art online Client Access and Time Clock services. If our clients find convenience in these tools, they use them. If not, they don’t. Balance and flexibility is what keeps Payroll Express leading the pack in the Payroll Processing arena.  Visit us at www.payrollexpress.com to learn more.