Managing Staff Levels in Tough Times (Winter 2009)

For the last couple of years employers have been saying that the lack of good staff is the biggest constraint to the growth of their business. In stark contrast with this, over the last few months as the economy has tightened, employers have started laying off staff. It is never an easy thing to do, and it is really tough breaking up a good team. This article explores some of the alternatives to avoid having to break up the team and some of the pitfalls that employers have walked into.

Be upfront

Firstly, if employers are having a tough time with sales, they shouldn’t kid themselves that staff don’t know. The good ones take pride in their work and productivity, and they know if they are busy with orders, or filling in time with otherwise low priority tasks. They will be waiting and watching to see how you, the employer deals with the situation. The longer you try to avoid dealing with it, the more nervous they will get. Even in tough times, the good ones will have other options and they will take them if they don’t feel confident with your handling of the situation. Good staff are also the ones your business can least afford to lose.

Control hours If labour costs have to be reduced, several options can be applied. Start with controlling the hours of work. Unless it is absolutely critical, stop all overtime and casual / temporary workers. Where staff on wages are working more than the minimum hours stated in the employment agreement, their hours should be reduced to the minimum. Where staff have accumulated annual leave, they should be encouraged to take it.

Reduce contracted hours

The next step is to look at reducing the contracted hours of work. To do this you will need to have the agreement of the staff affected, otherwise it is a unilateral change to the employment agreement. If this option is being considered, you will need to reflect on what is fair for the individuals. A reduction of four hours a week is a 10 percent pay cut for a full-time staff member, but a 20 percent cut for a person who works 20 hours a week.

Reducing staff numbers

If this hasn’t achieved the desired savings, you will have to look at reducing staff numbers. Identifying those who want to go and pursue other options is the least painful approach. Are there any staff who are considering retiring or resigning? Is anyone planning to do their ‘overseas experience’ and do they want to bring it forward?

Staff layoffs

Finally, the decision might come to actively layoff individuals. It is really important that there is genuine consultation with your staff, explaining the situation and the options. How should this be done? Should a team be removed, should all part time jobs be stopped or should there be a selection of individuals? Whichever choice is made, it has to be justifiable in the eyes of the law. That includes both a fair process and a genuine need for change. In one case, an employer developed a comprehensive method for assessing and rating the suitability of the employees they were considering making redundant. But instead of appointing those who got the best ratings, they selected the individuals they wanted and ignored the ratings. The redundancies were found to be unjustified dismissals. Therefore, employers who find themselves having to cut staff costs should seek advice before embarking down a path that may turn out to be the incorrect one. It is cheaper to get good advice than to get it wrong.

Published in WINE Hawke’s Bay Winter 2009.

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