Few Strategies to reflect on

Layoff
• Three of the companies consistently listed on
Fortune’s 100 Best Companies to Work For In
America–
– Southwest Airlines
– Harley-Davidson
– Federal Express
have adopted official no-layoff policies.
 Hiring Freeze and Internal Shift to Cover
Open Responsibilities
• Sometimes employers do fill up vacant
positions while continuing with the layoff.

• Disadvantages of hiring freeze is that

somewhat limited savings and the internal
shifting and reassignments will cause some
level of disorganization.
 Consider Who Will Be Leaving Anyway (and don’t replace them)

1. Contract employees
2. Temporary employees
3. Natural attrition
 Mandatory Vacation

• Requiring employees to take a certain number of

unpaid vacation days within a designated time frame
provides a short-term reduction in labor costs.

• For example, Hewlett-Packard asked employees to take

any six days off between May and October 2001.

• At Charles Schwab, employees were told to pick three

Fridays in a five-week period to take as unpaid
vacation. 
 Shortened Workweek/Restriction on
Overtime
• Reducing the number of hours in the workweek by just
a few hours, for example from forty (40) to thirty-five
(35), can generate significant savings.

• Salaries are essentially being reduced, the offset is

more time for employees to spend as they wish.

• Production is typically not affected because employees

tend to feel pressure to achieve the same results and
usually work harder to do so.
 Example
• Volkswagen adopted a four-day workweek for
employees based in Germany. Although workers cut
their hours by 20 percent, production actually
increased slightly.

• Lincoln Electric, has “guaranteed employment after

three years of service.” During business downturns,
the company mandates 30-hour workweeks. Lincoln
Electric’s website boasts that it has not implemented
a layoff since it started the policy in 1948.
 Reduced Salaries
• A great deal of money can be saved while
avoiding job casualties.

• Since the cuts apply to everyone, no one feels

singled out. 
 Reduced Salaries
• The best performing employees tend to be the
most dissatisfied with reduced pay and hours. 
 What to do?
• Perks like stock options, which do not
presently cost the employer anything, but
could eventually be very valuable to the
employee, or perks like job-sharing, flextime
and telecommuting should be considered. 
 Reduced Salaries
• Another downside to reduced salaries is that those with
lower salaries might feel disproportionately impacted by a
fixed percentage cut.

• Reducing salaries on a sliding scale, with the larger salaries

receiving the largest cuts, could offset this feeling.

• Targeting the owner and top management as the first to

have salary cuts also sends an important message to
employees.
 Reduced Salaries
• Charles Schwab introduced salary cuts ranging
from 5 to 25 percent for managers at the vice
president level and above
 Creativity
•  At Volkswagen, base salaries were reduced,
but the Christmas bonus and other once-a-
year payments were distributed over 12
months, which ultimately provided workers
with the same monthly incomes they had
previously received.
 Temporary Facility Shutdown

• Sun Microsystems, for example, implemented a

one-week shutdown of all U.S. plants in July 2001.

• Though Sun ultimately was forced to cut jobs in

October 2001 due to a further downturn linked to
the terrorist attacks, it was able to stave off layoffs
prior to then.
 Sabbaticals/Furloughs

• Accenture asked 800 consultants to take sabbaticals of

up to one year at 20 percent pay, and 1,500 consultants
applied to participate.

• Employees were eligible to take other jobs during the

sabbatical as long as they did not work for a competitor.

• Motorola, had instituted sabbaticals for the entire

workforce during slower times, like the summer
months.
 Sabbaticals/Furloughs

• The plan should spell out employee insurance

and benefit rights during the leave.
 Employee Lending

• Some employers choose to lend employees to

another company for a certain period of time
during which the borrowing company
reimburses the lending company for the
employee’s salary.
 Employee Lending

• Texas Instruments lent employees to vendors and other local

companies for 8 months.

• Texas Instruments paid the employees their normal salary,

including benefits, and the vendors reimbursed Texas
Instruments for the employees’ salaries during the loan
period.

• In addition, the borrowing companies agreed not to offer the

employees permanent jobs when the loan period ended.
 Employee Lending

• Another alternative is lending to non-profit

organizations.

• Instead of being laid off, employees are given

the option to work for a local nonprofit
organization for a designated period of time
while being paid a fraction of their normal
salary. 
 Example

• Cisco Systems’ employees received one-third

of their salary for a year during which they
worked for a nonprofit organization, in a
program intended to ease internet technology
transition.
 Employee Lending
• Some employees may not like being
“reassigned”
 Exit Incentives
• This option envisions offering employees
incentives to leave the organization in the form
of severance or early retirement packages.

• This strategy permits better targeting of jobs

and units, it recognizes employees for their
past commitment to the organization, and
helps retain the remaining employees.
 Exit Incentives
• Exit incentives are expensive, create future
expectations and an entitlement mentality,
and discourage workers from leaving the
organization in the future.
 Few more things to look at
• Job sharing

• Restructuring

• Timing – Diwali , was it a good time to fire

employees?