Layoff or Pay Cut - My Position

This post represents my thoughts on a forum question posted on April 10, 2009. Which is the better approach: A uniform pay cut for all employees to spread the burden and save jobs; or layoff individuals because economic downturns usually call for a reduction in staffing anyway? Click here to see that post.

While there is no perfect answer to this question, I believe the following guidelines should apply:

First, layoff any marginal employees including poor performers and people with bad attitudes. Now is a great time to clear the deadwood.

Next, make sure you've brought in all outsourced and sub-contracted work as can feasibly be brought in-house to keep your own people employed.

Third, follow the "Lean Thinking" approach of using idle time to make improvements to your processes, practices and physical facilities; improvements you've been wanting to make but never had time to do when you were busy. Those improvement efforts will position you to be more effective when business picks up.

Fourth, begin to trim staff in proportion to business volume forecasts. You may want to consider "voluntary" layoffs. Frankly, given a choice, some people may want to take some time off (and collect unemployment benefits).

As a last resort, consider pay and benefit cuts. Here's where it gets difficult, especially if you have people working for minimum wage or at the lower end of the pay scale. So consider doing what you can with bonuses and highly paid employee compensation first. But ultimately, since a minimum staffing is probably required in order to be a viable business, you may need an across-the-board cut.

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