Employers Strive to Avoid Layoffs, Too

Surprising as it might appear at first glance, many companies, institutions and even employees are bending over backwards to avoid eliminating jobs.

That sounds like a stretch, given that the U.S. economy lost a net 533,000 jobs last month and more than half a million new claims for unemployment benefits are filed each week.

Yet, Sunday's New York Times reports that a notable minority of employers are cutting labor costs in a variety of unconventional ways, as an alternative to the ultimate step of cutting staff. The alternatives include shortened workweeks, unpaid vacations and other "furloughs," wage freezes, scaling back or suspending pension contributions…even voluntary salary reductions. At Brandeis University, 90 out of 300 professors volunteered to give up 1 percent of their pay to help the university avoid laying off workers. In the manufacturing world, notes the Times,

Companies nipping at labor costs with measures less drastic than wholesale layoffs include Dell (extended unpaid holiday), Cisco (four-day year-end shutdown), Motorola (salary cuts), Nevada casinos (four-day workweek), Honda (voluntary unpaid vacation time) and The Seattle Times (plans to save $1 million with a week of unpaid furlough for 500 workers). There are also many midsize and small companies trying such tactics.

One such smaller firm is Hot Studio, a San Francisco Web design company. Instead of giving the usual year-end bonuses, gave its employees paid time off over the holidays.

Besides looking to maintain morale, employers want to avoid getting caught short-handed if business recovers quickly and avoid ejecting workers who have proven highly productive based on modern-day performance metrics that many businesses now use.

The movement is not with out nay-sayers, however. Yale University professor Truman Bewley, an expert on labor economics, told the Times,

If the sacrifices look as though they are going to continue for many months, … some workers will grow frustrated, want their full compensation back and may well prefer a layoff that creates a new permanence. “These are feel-good, temporary measures,” he said.

More Companies Are Cutting Labor Costs Without Layoffs [New York Times]