How to avoid layoffs when times are tough

When times are tough, running a business and team can feel like steering a ship that's about to capsize. The captain must make critical choices about letting go of what is weighing the ship down.

And just as the crew might jettison cargo to stay afloat, the company's leaders, partners and investors often look to reduce costs to keep the business viable.

One of the first solutions that comes to mind is to lay off staff, which seems like the most logical idea: fewer people on the payroll equals lower monthly expenses. Although the implementation of this measure is not easy, mass or partial redundancies are the way many choose to adjust their budgets.

Faced with the onslaught of automation and increasingly fierce global competition, many organisations have had to rethink their staffing strategies. To give just a few examples, big companies such as Microsoft, Amazon, Google, Meta, and Twitter have all drastically cut their workforces.

The problem is that, in the long run, these decisions have ended up hurting employee engagement and the company's profitability.

The real cost of layoffs

Starting to cut staff has other costs that need to be taken into account. HR professionals need to be acutely aware of the wider implications or hidden costs of laying off employees.

Layoffs can severely damage the employer brand, making it difficult to attract top talent in the future. In addition, the negative impact on the morale and productivity of remaining employees can outweigh the immediate financial savings.

The uncertainty and fear associated with layoffs can reduce engagement, decrease productivity, and increase turnover rates among remaining staff. Severance pay and other employee benefits also represent significant costs that can strain a company's finances.

By exploring alternatives to layoffs, such as internal recruitment, cost-saving measures, and flexible working arrangements, companies can maintain workforce stability and build a more resilient organisation.

Strategic alternatives to layoffs

HR professionals play a crucial role in guiding cost-cutting strategies, ensuring that decisions are made in an informed and compassionate manner. In doing so, they safeguard the company's reputation and foster a positive and motivated workforce, ultimately contributing to long-term success.

Thus, rather than making redundancy a default response, HR professionals can consider various strategic alternatives to maintain workforce stability.

Internal hiring and redeployment

One of the most effective alternatives to layoffs is internal hiring and redeployment. By shifting employees to different roles within the company, organisations can retain valuable talent and fill skill gaps without resorting to termination. This approach not only preserves institutional knowledge but also fosters a culture of growth and adaptability. Workforce planning becomes more dynamic as employees are upskilled or reskilled to meet new demands, creating a versatile and resilient workforce.

Cost-saving measures

Before considering layoffs, companies can implement various belt-tightening measures. These might include reducing non-essential expenditures, freezing hiring for non-critical positions, and renegotiating contracts with suppliers.

Offering voluntary unpaid leave or temporary salary reductions can also be viable short-term solutions. By transparently communicating the reasons behind these measures, employers can maintain trust and morale among their staff.

Flexible work arrangements

Flexible work arrangements, such as remote work or compressed workweeks, can also help reduce operational costs. By lowering expenses related to office space and utilities, companies can save money without sacrificing their workforce. Policies in the workplace that support flexible arrangements demonstrate a commitment to employee well-being, which can enhance job satisfaction and loyalty.

Voluntary separation programmes

Offering voluntary separation programmes with attractive benefits for employees can be a more humane alternative to forced layoffs. Such programmes typically include enhanced termination pay and extended healthcare benefits, making the transition smoother for those who choose to leave. This approach can reduce the workforce in a controlled manner while minimising the negative impact on team morale.

Investing in technology and automation

Strategic investments in technology and automation can increase efficiency and reduce labour costs over time. By automating repetitive tasks, companies can reallocate human resources to more value-added activities. While this may initially seem counterintuitive as a layoff alternative, it positions the company for long-term sustainability and growth, ultimately protecting jobs by improving overall productivity and competitiveness.

Enhancing employee engagement and productivity

Focusing on enhancing employee engagement and productivity can also yield significant cost savings. Engaged employees are more likely to be productive and contribute positively to the company’s bottom line. Implementing policies in the workplace that promote a healthy work-life balance, provide opportunities for professional development, and recognise employee achievements can foster a motivated and efficient workforce.

Collaborative problem-solving

Involving employees in decision-making processes related to cost-saving and efficiency improvements can lead to innovative solutions that management alone might overlook. Encouraging a collaborative approach not only harnesses the collective creativity of the workforce but also builds a sense of ownership and responsibility among employees.

Cutting costs with compassion and foresight

Employers must carefully consider their options during lean seasons. While layoffs might seem like the most straightforward solution, they often come with significant hidden costs and long-term consequences.

Exploring strategic alternatives – such as internal hiring, cost-saving measures, and flexible work arrangements – can help organisations maintain stability and resilience.

HR leaders are essential in navigating these challenging waters, ensuring that decisions are made with compassion and foresight.

Ultimately, by safeguarding the company's reputation and fostering a motivated workforce, they contribute to the organisation's long-term success and sustainability. In the end, the goal is not just to survive the storm but to emerge stronger and more resilient, ready to face the future with confidence.