3 Alternatives to Layoffs
When changes are necessary, layoffs aren’t the only option. Here are three alternatives companies can evaluate before making workforce reduction decisions.
Layoffs may seem like the obvious answer when facing financial uncertainty, but companies should carefully evaluate their options before opting for a reduction in force (RIF). Even the most well-planned RIFs can damage employee morale, reduce productivity, and harm the company’s reputation.
Before moving forward with layoffs or other workforce reductions, companies should consider these alternatives.
1 – Internal Transfers as an Alternative to Layoffs
Employers should always look at the big picture when considering layoffs.
For example, what positions are available across the organization? Consider employee skill sets and how else these individuals might be able to add value to the company. Can financial issues within one department be addressed by transferring employees to another part of the company that has a greater need?
Contrary to layoffs, internal transfers can help preserve employee morale. Plus, according to recent data from the Society for Human Resource Management (SHRM), it costs about $4,700 to hire a new employee. Internal transfers can be especially effective for companies looking to reduce headcount in one area without losing talent across the organization.
Tip: This strategy is most successful when built into the company’s professional development initiatives. If you cross-train employees and increase their skill sets, you’re more likely to find a place for them even if their original role is eliminated.
2 – Voluntary Buyout Programs (VBP)
Voluntary buyout programs (VBPs) enable employers to reduce headcount in a way that’s often considered more compassionate than layoffs. When managed properly, VBPs can address financial needs without making headlines. These programs are typically used by organizations seeking to reduce headcount while minimizing the impact of involuntary layoffs.
Voluntary buyout programs give employees a choice, rather than making the decision for them. Other names for this approach include employee buyouts, voluntary separation program (VSP), voluntary retirement program (VRP), or voluntary layoffs.
Tip: Although voluntary buyout programs are a compassionate alternative to layoffs, it’s still important to think about employee morale during times of significant change.
💡HR Expert Insights: Reducing Layoffs Through Workforce Planning
Jennifer Bender, Strategic HR Business Consultant, recently shared a success story illustrating how a healthcare technology company saved nearly $1 million by preventing layoffs.
As a result of fluctuating client needs, a healthcare tech company fell into a cycle of rapid hiring and workforce reductions. These constant staffing changes created a financial strain on the business and drained employee morale. To address the issue, the company developed an innovative system to leverage employee skill sets while accommodating their clients’ ever-changing needs. The company's proactive thinking led to fewer layoffs, greater cost savings, and improved employee morale.
Read the full workforce optimization success story.
3 – Reskilling and Upskilling
Employers might also consider employee reskilling or upskilling. By training existing employees on new skills or improving upon their current talents, you can help them develop professionally while addressing skill gaps. This strategy is particularly valuable for companies experiencing shifting skill demands rather than overall workforce reductions.
Reskilling and upskilling ultimately lead to greater productivity while helping companies dodge the hassle and costs associated with hiring new employees. Plus, it creates a culture of employee respect and value. In fact, data from Gallup indicates that employees who strongly agree that their organization encourages them to learn new skills are 47% less likely to be searching or watching for another job, so this benefits companies on many levels.
Tip: Proactivity is key to reskilling and upskilling. If companies wait until layoffs are an imminent possibility, it’s probably too late to implement a successful reskilling and upskilling initiative.
Next Steps
Despite exploring other options, companies may decide that layoffs are the best course of action. Even if the ultimate solution is a reduction in force (RIF), it’s good to know that an employer did their due diligence by evaluating alternatives instead of rushing to a quick decision. In these situations, taking a thoughtful and structured approach to a RIF is critical.
Planning to reduce headcount? You may be interested in Reductions in Force: The Guide to U.S. Compliance.
