Thinking About Layoffs? What you need to know before letting ...

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<ul><li><p>HR</p><p>Cost-cutting alternatives</p><p>Legal considerations</p><p>Practical tips for before, during and after</p><p>Series for Employers</p><p>Thinking About Layoffs?What you need to knowbefore letting people go</p></li><li><p>All photos in this booklet are for illustrative purposes only. They are not actual photos of any individuals mentioned. </p><p>Catalogue Item # 759915</p><p>This publication is available to view or order online at Copies can also be ordered from the Learning Resources Centre by telephone at 7804275775 or by fax at 7804229750.</p><p>For copyright information contact: Alberta Human Services Career and Workplace Resources Telephone 7804221794 Fax 7804225319 Email</p><p> 2012 Government of Alberta, Human Services</p><p>This material may be used, reproduced, stored or transmitted </p><p>for non-commercial purposes. However, Crown copyright is to </p><p>be acknowledged. It is not to be used, reproduced, stored or </p><p>transmitted for commercial purposes without written permission </p><p>from the Government of Alberta, Human Services. This publication </p><p>is not for resale unless licensed with Government of Alberta, Human </p><p>Services. Every reasonable effort has been made to identify the </p><p>owners of copyright material reproduced in this publication and to </p><p>comply with Canadian copyright law. The publisher would welcome </p><p>any information regarding errors or omissions.</p><p>Government of Alberta, Human Services publications may contain </p><p>or reference publications, trademark, patent or copyright held by </p><p>third parties (third party material), identified with a credit to the </p><p>source. This does not grant the user a licence or right to that third </p><p>party material. Users who wish to reproduce any third party material </p><p>in this publication should seek permission from that third party. </p><p>ISBN 978-0-7785-8847-4</p><p>09/201220M</p><p>Information in this publication was accurate, to the best of </p><p>our knowledge, at the time of printing. However, legislation, </p><p>labour market information, websites and programs are subject </p><p>to change, and we encourage you to confirm with additional </p><p>sources of information when making career, education, </p><p>employment and business decisions. </p></li><li><p> Government of Alberta, Human Services 1</p><p>About this publication 2</p><p>Before You Decide to Let People Go </p><p>Decide whether layoffs make sense 4</p><p>Review your business plan 4</p><p>Consider the costs of layoffs 5</p><p>Assess other solutions 6</p><p>Think lean 6</p><p>Consult with employees 7</p><p>Change compensation 7</p><p>Cut back working hours 9</p><p>Downsize without layoffs 11</p><p>When Layoffs Are Unavoidable </p><p>Before the layoffs 13</p><p>Document the business reasons 13</p><p>Know the law 14</p><p>Contact unions and industry associations 15</p><p>Decide whom to lay off 16</p><p>Choose a time 16</p><p>Develop a communications plan 17</p><p>During the layoffs 18</p><p>Be efficient but compassionate 18</p><p>Give notice 19</p><p>Offer severance pay 19</p><p>Assist departing employees 20</p><p>Conduct confidential exit interviews 23</p><p>Use an employment termination checklist 24</p><p>After the layoffs 25</p><p>Recognize the impact on those left behind 25</p><p>Maintain employee-employer trust 26</p><p>Maintain employee morale 27</p><p>Resources 28</p><p>Alberta Human Services 28</p><p>Provincial resources at a glance 29</p><p>Federal resources at a glance 30</p><p>Other resources 30</p><p>Employment Termination Checklist 31</p><p>Contents</p></li><li><p>2 Government of Alberta, Human Services</p><p>Section one, Before You Decide to Let People Go, will help you decide whether laying off staff is the best course of action. It suggests a range of other ways to cut costs or to reduce your workforce so you can see whether its possible to avoid letting people go.</p><p>When you have weighed all the options in section one, you may find that you have no choice but to lay off some of your employees. </p><p>Section two, When Layoffs Are Unavoidable, will help you navigate the difficult process of letting employees go. Youll find information on</p><p> laws and best practices to consider when planning and conducting layoffs</p><p> ways to help laid-off employees</p><p> ways to motivate your remaining staff</p><p> additional resources that can help you through the process</p><p>This booklet provides general information about employee layoffs. For information specific to your situation, consult with a lawyer who specializes in labour law.</p><p>About This Publication</p><p>This book is for employers, managers, supervisors and business owners who are considering layoffs for any reason. It has two purposes and is divided into two sections.</p></li><li><p> Government of Alberta, Human Services 3</p><p>Before You Decide to Let People Go</p><p>In this section:</p><p>Decide Whether Layoffs Make Sense 4 Assess Other Solutions 6</p></li><li><p>4 Government of Alberta, Human Services</p><p>You might be considering layoffs for many reasons. Perhaps youre changing your services, reorganizing your business, using new technology or moving production overseas. Or maybe you face external pressures, like a general economic slowdown or reduced demand for your product or services.</p><p>Whatever your reasons for considering layoffs, before you take any action, ask yourself, Do we have too many employees for the work we need to do, or is that work generating too little revenue?</p><p>The answer to this question should lie in your business plan. Think about your future goals and objectives and the resources you need to achieve them.</p><p>Some specific points to consider:</p><p> What products and services will you be offering?</p><p> Which of these products or services are likely to be profitable?</p><p> What talent will you need to run the business?</p><p>If your answers to these questions suggest that you need all your current employees to achieve your business goals, then your problem may be too little revenue. If so, it is a warning sign that letting people go is not the best solution. Cutting your workforce could reduce the efficiency of remaining staff and lower the potential for future growth.</p><p>Review your business plan</p><p>Decide Whether Layoffs Make Sense</p><p>Are layoffs the best course of action for your business? Having fewer employees may prevent you from achieving your business goals. Layoffs also have costs, both direct and indirect. This chapter discusses the financial and strategic disadvantages of letting employees go.</p></li><li><p> Government of Alberta, Human Services 5</p><p>Decide Whether Layoffs Make Sense</p><p>Consider the costs of layoffs</p><p>If you need to reduce costs in your business, cutting jobs may seem like the quickest and easiest way. Strategically, though, it may not be the best course of action. Often, layoffs have little effect on costs. If you lay off employees without carefully weighing the pros and cons, you risk ending up with a smaller version of what didnt work before.</p><p>Of more than 1,000 businesses surveyed, 89 per cent of those downsizing their workforce reported expense reduction as their primary goal. Only 42 per cent actually reduced expenses.1</p><p>Layoffs carry a number of direct costs in time and money. They can also have less obvious costs, such as negative effects on morale and reputation.</p><p>Direct costs of layoffs In the short run, layoffs actually lead to increased </p><p>costs. In addition to severance and benefits packages, you may have to pay accrued vacation and outplacement service fees.</p><p> Layoffs take time away from revenue-generating activities. Managers have to inform employees and arrange the paperwork. They must also reallocate work to remaining employees, train them to do the work and manage concerns about the changes.</p><p> Cost savings last only as long as you dont need to rehire employees. Many companies later find themselves back to pre-layoff employment levels. There are costs for attracting, screening and recruiting replacements. </p><p> Training new employees and having supervisors available to offer guidance and support while the newcomers get up to speed is expensive. Retained employees are more productive than new employees who are learning the job.</p><p>Indirect costs of layoffs Your remaining employees may be worried and </p><p>unhappy at work. Low morale makes productivity drop at a time when the business needs it to increase.</p><p> Employees may resign if they fear losing their own jobs. Resignations create indirect costs through lost knowledge and skills, contacts, customers and potentially market share.</p><p> If your goal is to be an employer of choice in your industry, layoffs may damage your businesss brand and its ability to attract the best talent.</p><p> Many ex-employees will be reluctant to return to the business that laid them off. This attitude could be a problem if you want to rehire them in the future.</p><p>1 Wyatt Company. Wyatt's 1993 Survey of RestructuringBest Practices in Corporate Restructuring. New York: Author, 1993.</p></li><li><p>6 Government of Alberta, Human Services</p><p>One way to make your business more efficient is by doing more with lessless human effort, less equipment and less space. This approach is often called lean thinking. It can save you money on operating costs, such as equipment, inventory, warehouse and office space, printing, postage and business travel.</p><p>Think of ways to make the most of your resources and employees. Could you enhance the quality of your products and services while keeping your costs the same or lower? Even if you suffer reduced profits for a year, keeping all your staff could boost productivity and position your business for better returns in the future.</p><p>Consider these questions:</p><p> Are there ways to reduce your inventory? Re-examine your supply chain to see if you can cut down on the time products are in your warehouse.</p><p> Could you save travel and real estate costs by arranging for employees to work from home? Other benefits of this arrangement include improved employee morale, productivity and work-life balance. </p><p> Could you co-market products with suppliers or other businesses? If you own a manufacturing facility, such as a bakery or similar operation, could you lease out the space and equipment in your downtime? Could existing employees handle tasks for other divisions with little extra effort?</p><p> Has there been any change in demand for your businesss products or services? Are some no longer needed? Are others in greater demand? If so, you might focus your efforts on only a few.</p><p> Can you reduce small costs that add up over time, such as coffee, office supplies or courier services? Its a good idea to explain the costs of doing business to all your employees. If they know and understand the price of these things, theyll be better able to help curb operating expenses.</p><p> Could you move your office or warehouse to a lower-cost location? Moving out of a downtown core or high-rent area can mean substantial savings for your business.</p><p>Think lean</p><p>Assess Other Solutions</p><p>If layoffs arent the answer, what is? While no single solution will fit every business, a number of cost-cutting strategies may work for you. This chapter discusses better efficiency, changes to compensation, reduced working hours and ways to downsize without layoffs.</p><p>Productivity Alberta</p><p>Productivity Alberta offers many services to help you boost productivity. Learn how you can make the most of your business by taking advantage of</p><p> on-site assessments</p><p> seminars</p><p> workshops</p><p> a do-it-yourself assessment tool</p><p> a supply chain strategic collaboration program</p><p>For more details, visit or call 780-427-6648 (Edmonton)</p></li><li><p> Government of Alberta, Human Services 7</p><p>Consult with employees</p><p>Change compensation</p><p>If you need to cut costs, your employees can be your best resource for figuring out how to do it. Before you start the conversation, try to estimate the amount of savings or increased revenue needed to avoid layoffs. With this goal in mind, invite employees thoughts on</p><p> how the business could cut operating costs</p><p> what cutbacks they could and would accept</p><p> what they could do to bring in more business or access new markets</p><p>Changing employee compensation is one of the quickest and most effective ways to reduce costs. However, its one of the least popular options with employees. It also raises legal concerns. You should always seek professional advice before making changes to compensation.</p><p>When employees understand the nature of the problem, their creative solutions may surprise you. Some might volunteer to reduce the number of hours or days they work. Others might suggest ways to improve processes. If they feel they have contributed to the discussions, they are also more likely to support management decisions or changes in practices.</p><p>Effective consultation can also increase morale and improve employee commitment, performance and job satisfaction.</p><p>Set up a new payment model</p><p>One way to save money without cutting employees total compensation is to change the form of their pay. By using a new payment model, you can reduce or defer the cash payments you need to make.</p><p>For example, you could give employees company shares in place of pay or pay increases. Another option is to bank overtime and give paid time off instead of paying </p><p>overtime if an overtime agreement exists.</p><p>Find out more</p><p>Banked Overtime</p><p> For more details on banked overtime, go to the Employment Standards Tool Kit for Employers, Section 4: Overtime and Overtime Pay. </p><p>Assess Other Solutions</p></li><li><p>8 Government of Alberta, Human Services</p><p>Reduce benefits and perks</p><p>You may be able to find savings by reducing your businesss benefits package and employee perks.</p><p>For example, you might</p><p> reduce or cut the cost of staff parties and other company social functions</p><p> cut seldom-used benefits</p><p> opt for less expensive benefits packages</p><p> freeze benefit increases</p><p> reduce or eliminate bonuses </p><p> have employees pay a portion or all of the premiums for their health benefits</p><p>If you opt to reduce or eliminate the employer contribution to benefit premiums, you might offer to continue to pay the premiums for now and collect the money later. Set up a repayment plan that is fair to both you and your employees. Be sure you have written permission to take any unpaid amount from an employees final paycheque if he or she resigns.</p><p>If you do need to cut benefits, you can refer your employees to government programs for support. The Alberta Adult Health Benefit and Alberta Child Health Benefit programs help pay essential health-care bills for qualified low-income families.</p><p>Reducing perks and benefits may not be an option for all companies. In some cases, perks are too important to staff morale, particularly for employees in lower- paying positions.</p><p>Find out more</p><p>Health Benefits</p><p> For more information about health benefits offered by Alberta Human Services, click Alberta Adult Health Benefit or Alberta Child Health Benefit.</p><p>1-877-469-5437 (toll-free)</p><p>780-427-6848 (Edmonton)</p><p>Reduce pay</p><p>When reducing pay, caution and fairness are crucial. Pay cuts can have a long-lasting effect on morale. Be sure to communicate clearly and openly with employees about the reasons for the cuts and the way they will be handled. Make it clear that the cuts are a way to avoid layoffs.</p><p>If you intend to reduce any form of pay (including overtime, vacation or general holiday pay), you must notify the affected employees before the start of the p...</p></li></ul>