Workforce Reduction

Journal: Workforce Reduction

Introduction: Workforce reduction is one of the toughest challenges for a human resources manager. In today’s marketplace, financial and growth considerations can change rapidly, affecting an organization’s potential growth or even its existence in some cases. The latter is especially true with startup companies, or new organizations that may initially grow a bit too quickly and then must retrench when the market changes. Planning for a reduction is the responsibility of the human resource manager, and if done correctly can mitigate some of the difficulty and toll taken on all concerned.

Scenario: Your boss tells you the company is suffering losses in the market, and if some employees are not laid off in the next 3 months, the company may not survive.

Based on your reading in Chapter 5 and Table 5.2:

Discuss what options you would consider, and why, when planning for a reduction in the workforce.

Why would your choices for planning a reduction in the workforce be preferable to others?

Attachment named Chapter 5 ADA has table 5.2

ANSWER

Workforce Reduction

Correct handling of employees during layoffs is crucial, especially during a down economy where the company suffers losses in the market. The human resource professionals within a company have the responsibility of ensuring that proper conducts of lay off during turbulent economic times are conducted. Regarding the current scenario, pay reductions and work sharing would be the most effective options to reduce labor costs and amount of suffering. These options also allow organizations to undo changes after the economic downturn without having to lose skilled employees.

Work Sharing is considered an adjustment approach designed to enable the employers and employees to avoid termination where there is a need for a temporary reduction of the workforce. Considerably, the employees must share the available work over a certain period (Stewart and Brown, 2019). Work sharing is preferable since it keeps the workers on the job and maintains their income, thus enables them to retain their retirement and health benefits. For instance, the senior employees may accept to reduce their working hours and weekly wages to prevent the junior staff from being laid off.

Pay Reductions focuses on reducing the wages rather than terminating the employees to lower the cost of labor (DeCenzo, Robbins and Verhulst, 2016). The company will save money through pay cuts that would have been done through laying off workers. Considerably, pay cuts are considered a more humane option in terms of cost savings. Pay cuts focus on the risk management principle since they distribute the risk and degree of damage. Therefore, every employee loses a part of their earnings rather than few people having to completely lose their earnings. Relatively, the company may end up spending a lot of resources on public relations after they have terminated people. The pay cut process is fair since all employees agree to sacrifice a portion of their income.

In summation, workforce reduction aims to reduce labor costs and increase savings. Therefore, it is important to consider layoff options with less damage to the employees and those that will distribute the risk of layoff among all employees. Work sharing and pay reductions could be effective options for the company to save money which would still be done through high-risk options such as downsizing and demotions.

References

DeCenzo, D. A., Robbins, S. P., & Verhulst, S. L. (2016). Fundamentals of human resource management. John Wiley & Sons.

Stewart, G. L., & Brown, K. G. (2019). Human resource management. John Wiley & Sons.