Temporary layoffs, sometimes called furloughs, are a very good way of controlling costs with minimal disruption to the longer-term goals of the company. Even before the layoff, employees are urged to take vacations. This can be particularly useful for direct-labor personnel when shop orders are low. Some companies cut back on the hours per week with corresponding pay reductions. Another method is to give employees furloughs for one week at a time. After the first week of layoff, the employee is then entitled to collect unemployment pay for every subsequent week.
Furloughs need to apply to
everyemployee from the top officer on down. This spreads the cost reduction over the entire company and will keep the employees morale up knowing that the bosses are being hit just as hard. Cutting the pay of the top-income people one week a month for a couple of months will reduce costs dramatically.
Not too surprisingly, it is my experience that the key staff people will come to work most of the time during their furlough weeks. But it also gives them time to take with the family or to handle other personal needs – especially during the summer months.
This approach is particularly valuable for smaller companies looking for temporary deep cuts in overhead that won’t cripple the company over the long term.
This program is part of the plan that should be discussed with all the employees ahead of time. People know when times are tough. Major job losses are being reported daily in the press, so they will welcome a frank discussion from management and a plan that protects their jobs/company over the longer haul.