With layoffs happening in record numbers, it’s a crucial time to strengthen the strategic value that HR brings to the business, which can including cost cutting strategies to help the organization survive a recession.
Need some ideas? We have examples from past webinars with business leaders about how they adjusted their HR and compensation strategies during the last recession. These approaches that worked before to save your company money during a recession could help again in the present economic downturn.
Here are just a few ideas to help you cut costs and creatively tackle workforce planning in the current economic climate.
cost cutting Strategy #1 – Hiring Practices
In the present economic climate, hiring has slowed, but it hasn’t ceased. With the slowdown, HR can seize the opportunity to review and evolve their hiring practices. Cost cutting strategies can include revamping how talent is interviewed, selected and on-boarded as well as how offers are structured to maximize cost efficiencies when times are uncertain. This saves costs by making hiring practices more efficient, reducing employee turnover, and boosting business productivity through stronger hires.
What business leaders are doing to save costs:
“We are paying a hiring bonus rather than a higher salary.”
“It’s really a relief to be able to do a better job during the hiring process, rather than a rush job. We’re getting much better hires again.”
cost cutting Strategy #2 – Compensation Planning
An economic downturn is also a good time to review your compensation philosophy and review your compensation structures and pay equity in a way that will best support your organization for the times ahead. Compensation planning is essential to cost cutting because it can help show you where you are overpaying certain positions and uncover options to help you can maximize payroll.
What business leaders are doing to save costs:
“We have undertaken a project to identify market salary ranges and identify overpayment and underpayment in an effort to balance wage costs across the board.”
“We froze compensation to senior executives but kept increases – although less than normal – for top performers.”
“We’ve cut base salaries by $5,000 for the first six months of employment. With normal attrition, this will save us $400,000 a year.”
cost cutting Strategy #3 – Benefits packages
During a recession, many organizations review their total rewards and benefits packages to see where they can cut costs without impacting employee pay and doing the least amount of damage to employee morale. With employees working from home, many organizations are already saving on costs associated with maintaining a positive work environment, but some organizations are also looking at deeper options to cut costs as well as how to educate and help employees understand the impact of an economic downturn.
What business leaders are doing to save costs:
“We are suspending 401(k) match for the time being.”
“We brought our 401(k) advisor in to do a brown bag session on creating a budget and debt management for our employees.”
“We did away with pay in lieu of PTO (paid time off) and are now on a ‘use it or lose it’ policy. This eliminates huge payouts to employees when they leave.”
cost cutting Strategy #4 – Training & Development
Operating in an economic downturn can be tough. Many organizations are operating with a leaner staff, reduced resources, and a lot of uncertainty. If you’ve been through layoffs, you might be discovering that you have lost knowledge share in addition to coworkers you really valued. You may also be missing some skills that you need. Fortunately, there are steps you can take to help your workforce grow and learn.
What business leaders are doing to save costs:
“We have created an admin pool. All of our administrative staff are cross-trained. The team serves as a pool that the organization can call upon when help or extra assistance is needed. This way, we do not have to bring in temps.”
“As an HR Consultant, I am helping clients utilize on-the-job training or wage reimbursement programs sponsored by the state government.”
cost cutting Strategy #5 – Staff Resourcing
Reduced budgets means that your employees are probably overburdened and you can’t hire more staff. At the same time, you may not have the resources you need to get all your projects done. You could even still be looking at layoffs if you don’t manage appropriately. This is stressful, but you do have options.
What business leaders are doing to save costs:
“We have partnered with a local university to hire interns who are working part time at a set salary. They do not receive benefits, but they do get on the job training while we fill positions at a lower pay rate.”
“We are allowing employees to schedule a rotating ‘layoff’ week to avoid job elimination.”
cost cutting Strategy #6 – Organizational Communication
When times are tough, communication is key. Organizations know this, but it can be easier said than done. Some companies underestimate just how much communication is needed or don’t know what information to communicate or how.
What business leaders are doing to save costs:
“We are being completely transparent with the financial condition of the organization, with the CEO giving an update every other Friday.”
“Don’t forget the importance of bringing people together to celebrate the success of the organization. Include the leaders to prevent a perception that they are hiding.”
Are you paying your top performers at the market rate so you can retain them when the economy recovers? Are you getting your compensation data from multiple sources to ensure that your salaries are fair and competitive?
Consider giving a PayScale demo a try to learn how compensation management software can deliver value to your business in any economic climate.
