No, Layoffs Are Not Necessarily the Best Way a Company Can Save Money

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The past several years have brought considerable layoffs. The onset of the COVID-19 pandemic resulted in an economic rollercoaster that adversely affected the economy, and the ripple effects can still be felt today.

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Inc. reported that tech giants like Amazon, Google and others started 2024 with massive layoffs — with more potential layoffs to come.

When businesses face difficult financial issues, layoffs are often considered to reduce costs. However, layoffs have their expenses. In many cases, they lead to payouts for severance, increased unemployment insurance, lower spirits and reduced productivity.

Here are two reasons why layoffs are not the best option for a company to save money, according to the Harvard Business Review:

• Layoffs reduce morale and erode employee trust: Layoffs have more than just a financial effect on employees. When layoffs happen, employee morale plummets, and any trust that employees have in the company can be significantly reduced. Both of these factors can affect employee productivity, which hurts the company’s bottom line.

• Layoffs put companies under public scrutiny: In an increasingly connected digital world, news of layoffs can travel fast both within the company and outside the company. Larger, high-profile companies are placed under greater scrutiny when news about layoffs is announced, which can have negative effects on the company’s image and finances (such as a company’s stock price).

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5 Alternatives to Layoffs For Companies To Consider

To avoid any negative consequences of laying off employees, here are several cost-cutting alternatives for companies to consider, as per ADP:

• Pay cuts: Rather than eliminate jobs, companies should consider cutting salaries, especially for highly paid executives. Reducing salaries, even if just temporarily, is a viable cost-cutting measure which could mean that more employees get to keep their jobs.

• Job transfers: Instead of simply eliminating jobs, companies could offer job transfers to employees with transferable skills. Perhaps other areas of the company have a need and a higher budget. Job transfer can eliminate a serious financial blow to employees.

• Furloughs: Furloughing employees rather than laying them off can save the company money in the long run and help save jobs. By temporarily eliminating or reducing working hours, employees may be eligible for temporary unemployment benefits and the peace of mind that they still have a job.

• Reduce spending in other areas: Instead of laying off employees, companies can find other areas to reduce expenses. This can mean eliminating business travel, cutting paid in-office lunches, or even some employee benefits (if it means saving jobs).

• Reduce overtime for non-exempt employees: Restricting overtime capability for non-exempt employees can also significantly reduce costs. Instead, companies can encourage increased efficiency and productivity so that the job can get done within a standard 40-hour work week.

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This article originally appeared on GOBankingRates.com: No, Layoffs Are Not Necessarily the Best Way a Company Can Save Money