In soft economic times cutting back on payroll usually means laying off employees.
As a tactic it works, but this strategy reduces your productivity and can end up costing you in the long run. You will have lost any investment you made in their training, lost their knowhow and will be stuck with the cost of hiring a replacement sometime in the future when business starts to pick up again, so avoid it if you can. If laying off employees is the only option, give careful thought to how you can maintain production and customer service so as not to plunge into a downward spiral of poor service leading to increasing customer desertion. Here are some suggestions for how to slim the payroll burden.

Slim the payroll
Reduce pay and eliminate raises: a reduction in pay won’t be popular but if the alternative is redundancies among the employees they might well agree to go for it. At least they keep their job (and
you save on payroll) until business picks up again.

Cut back on work hours

This will reduce payroll without entirely losing the employee. This can be done by decreasing daily hours or reducing days per week or moving to so many days per month. A reduction in hours may be viewed as preferable to having no job whatsoever. Sharing the pain out among employees will be better for morale and you get to keep people on hand for when times improve.

Replace monetary with nonmonetary incentives
Offering the use of your vacation home or extra time off in lieu of a money bonus can show that
you understand your employee’s disappointment in not receiving a cash bonus but want to reward them for their hard work.

Encourage employees to take time off without pay
Canvass employees for those who would be agreeable to taking a period of time off work
without pay. The deal must be that they are guaranteed their job back at the end of the specified period.

Incentivise employees to leave
The least unpleasant way to downsize is to let natural attrition take care of the job by not replacing employees who quit or retire. If normal attrition will be too slow to reduce numbers to what you need/can afford, then offer employees an incentive to terminate: grant early retirement with full retirement benefits or offer an attractive severance package. Make clear this is for this occasion only.

Make use of independent contractors
Hiring is a long term commitment. Until things improve, soak up extra workload using independent
contractors instead of putting on workers.

Insource
Maybe some jobs you are currently outsourcing can be economically brought back into the workplace to be done by underutilised employees. Be careful not to breach employee or supplier contracts. Do this only if there is a distinct cost/benefit advantage over the outsourcing deal.

Reduce the cost of producing payroll
The actual cost of producing the payroll (calculating pay, producing cheques or making deposits and keeping track of employee information) is itself an area where savings can be made.

1. Outsource payroll: organising each payroll is a time consuming, (= costly), process with an element of danger added because of the possibility of making a mistake with the regulations and procedures that need to be navigated and the
forms and returns to be filled in to get it right. It may be more cost effective to outsource payroll to an online service provider who will carry out all
processes in accordance with the latest regulations, insert this information into the correct forms and get salaries deposited into your employee’s bank
accounts.

2. Use direct deposit for salaries: a good way to save money is to use direct deposit of payroll (DDP) in place of issuing paper payroll cheques. There is a
significant cost differential between an online transaction and the processes around preparing and issuing cheques.

3. Extend the payroll period: switch from a weekly to a biweekly or monthly payroll period to reduce processing costs.

The best rule of thumb for implementing any restructuring of work practices is to be honest with employees upfront and lay out the reasons that make the changes necessary for business survival. You also need to be mindful of the terms of existing union agreements and work with the union to achieve a conflict free alteration of procedures. And always take expert advice in labour related decision making to avoid breaching labour regulations.

Thinking about death is uncomfortable in itself – coldbloodedly sitting down and working out scenarios to deal with what will happen in the event of it actually happening is even more traumatic. That’s part of the reason why succession planning goes to the bottom of the ‘to do’ list for most business owners.

If your business has more than one owner then you need to understand the risks you may face if you die unexpectedly without having a proper buy-sell agreement in place. Looking at the situation quite objectively, if you were to make your spouse the heir of your share in the business, or, by default let that happen, would it be welcome to the other partners? Or to your spouse? A successful partnership is a delicately balanced relationship and bringing on board a
deceased partner’s spouse can be difficult. Do they get along personally? Would they see eye-to-eye about the future of the business? In the absence of any special arrangement the remaining partners cannot force the spouse to sell them their share, and the spouse cannot force the remaining partners to buy his/hers.
This sort of Mexican standoff can spoil a business and create a situation that is both unpleasant and unprofitable for your spouse.

Losing a partner is a dreadful enough experience in itself. Bequeathing your spouse an interest in your business that proves to be more of a burden than a support would be tragic. The  development of a business succession plan is crucial to making the business provide just the type of support you intended for them.

It’s all too easy to get people offside through poor communication – the careless remark that cuts to the quick, the dismissive answer. People make mistakes in how they communicate with others all the time.

Managers are no different.

The average age of the workforce is steadily increasing.  For employers, that means the average age of their workers is steadily increasing. Baby Boomers, who make up the majority of the workforce, are now aged 45 to 62 years. Over the next few years more and more of them will be retiring turning a trickle into a torrent.
In the past new hires would be found easily enough to replace them. In the future the shortage of replacement workers from among the younger generation, the so-called Gen-Y (currently aged 16 to 31 years old), may make finding the right, or any replacement a lot more difficult.

It’s not possible to get a handle on what issues an ageing workforce might present for your business until you have an understanding of the age grouping among your current workers and an idea of when they will start to retire, particularly those that are highly efficient, well skilled or just plain good workers. That can be discovered by carrying out a demographic study to show what percentage overall of employees will become retirement-eligible in the near future. A closer look will identify the key people whose departure would be a real loss to the business.

Next after that is to develop a strategy for tackling any problems the retirement wave might present. You can think in terms of hiring replacements and keeping current people on longer.

Hiring replacements

Most small businesses seem to prefer to hire from among Baby Boomers and Gen Xers with only a minority actually preferring to hire members of Gen-Y for their team.
Enthusiasm, a willingness to learn and technological savvy are reputedly among Gen-Y’s greatest assets but their unreliability, lack of experience, frequent job changing, know-it-all attitude and lack of team playing raise concerns for small business employers. But with Boomers going and increasing competition for the small pool of Gen-Xers there won’t be a choice. In the US, typical of advanced economies, the American Society Of Training And Development is predicting that 76 million workers will retire over the next two decades with only 46 million arriving to replace them. Most of those new workers will be Gen-Ys.
Employers will be faced with a multigenerational workforce among whom some real generational differences will exist.  Generational clashes in the workplace are nothing new. What is new is the size of the gap between their different values and work styles that could threaten to lower morale, increase employee turnover and reduce productivity. Getting them to work harmoniously will be a challenge demanding more focus on enabling and encouraging the ability of different generations to work in a collaborative manner. It’s definitely time to start catching up on information about management techniques for bringing out the best in Gen-Y. On the other hand, employers will be repaid, through the better retention and integration of Gen-Yers into the workplace, for any investment in training they make relating to those basic skills that generation is perceived to be short on such as conflict resolution skills, communication, supervision skills, workplace etiquette and customer service.

Focussing on retention

Keeping on older workers provides an opportunity to retain organisational knowledge for a
time and the opportunity to pass it on. Pairing older and younger workers together in a mentoring relationship, maybe guided by some formal training, builds skill level. Having new hires company more tenured employees as they perform their day-to-day tasks, (job shadowing), provides them with an insight into the resources, techniques, and short cuts that make experienced employees
more efficient.

Of course, these schemes are predicated on having the old hands around still to pass on their knowledge or to just be doing their job. The fact that Boomers are reaching retirement age isn’t to say that they necessarily will retire. Longer life expectation, poor saving habits and a rising cost of living are keeping many people back at work well after they become eligible to retire.
Circumstantial ‘push’ drivers like these may keep people at work but attractive ‘pull’ tactics based on more flexible and innovative working conditions, which suit their needs and circumstances, will ensure you retain or attract the best.

That’s why employees need to understand what will make employment continue to be attractive
to older workers. For example, older workers tend to prefer a workplace that continues to offer them training, makes some workplace accommodations to suit their reduced physical capabilities, provides flexible scheduling (such as part time work and work from home), offers retirement and health benefits and a phased retirement package.

As the workforce continues to age, businesses that want to stay competitive  will plan to retain and use the knowledge of their older workers, as well as arranging for it to get passed on to the next generation.

Well, the Credit Crunch is well and truly at our door.
 

And to ensure we are in the best position to continue to provide you with the knowledge to help lift the performance of your business I would be grateful if you would complete a short 5 minute survey.  We have commissioned the survey in conjunction with the RAN ONE Network.

This Survey is vitally important as it allows us conclusively document your opinions and then tailor new and even better services to overcome your obstacles.

Once the survey has been completed we will publish the results by publishing a Credit Crunch report.

I’m hoping you will understand how this survey is essential to maintaining and improving our current service standards during the Credit Crunch and beyond.

Please take part in the survey by clicking here:

Shape Your Business/RAN ONE Economic Crisis Survey