As oil dips below $30 a barrel and the dollar dives to the lowest it’s been since 2003, it is hard to see clearly through the downturn doom and gloom. It is a critical time for organizations to assess their operations, budgets and teams and strategically consider their options for weathering the economic storm while positioning themselves for future prosperity.
The reality is that many organizations today are considering ways in which they can reduce costs to stay afloat. Outlined below are some approaches and suggestions for organizations who are looking to reduce labour costs during the downturn. While consulting our clients, we encourage them to consider the following:
- A strategic approach to reducing costs (labour and other business costs) – consult the business plan and decide what goals and objectives need to be realigned or changed as a result in the downturn
- Manpower decisions should be based on the realignment of the business plan
- Encourage clients to be transparent, follow due process and to be fair when considering reducing labour costs
- Encourage clients to take a broader look to reducing costs – consider all aspects of the business, not just labour costs
When it comes to reducing labour costs, there are a number of strategic options for organizations to consider:
- Reduce or eliminate bonus payments
- Reduce commission pay out structures
- Reduce or eliminate monetary benefits (group benefits, car allowance, training allowances)
- Reduce or eliminate non-monetary benefits (flex days)
- Voluntary/in-voluntary shortened work week or work days
- Voluntary unpaid vacation or leaves of absence
- Eliminate/reduce overtime
- Pay reduction for all employees
- Voluntary early retirements
- Cut contingent labour (casual employees, don’t renew contracts)
- Lay-off low-impact jobs and poor performers
- Outsource work
- Look for productivity improvement practices
- Look for opportunities to substitute technology for labour
If an organization decides a reduction in pay is aligned with their strategic business plan, then it is important to ensure communication and role out of the reduction is done in accordance with employment standards and best practices. For your reference, we have provided below the Employment Standards section on giving notice:
Notice required before earnings reduced:
(1) An employer must give each employee notice of a reduction of the employee’s wage rate, overtime rate, vacation pay, general holiday pay or termination pay before the start of the employee’s pay period in which the reduction is to take effect.
(2) If an employer does not comply with subsection (1), an employee is entitled to the difference between the employee’s wage rate, overtime rate, vacation pay, general holiday pay or termination pay before the reduction and those rates and pay after the reduction from the time in the pay period in which the reduction was first applied to the end of that pay period.
If your organization requires support with Downsizing & Outplacement, Career Transition Support, or rolling out a labour cost reduction strategy, contact Salopek & Associates at 403 681 1232. We are available to support you through HR consulting and developing and implementing strategic solutions that will help your organization weather the economic downturn while remaining in compliance with employment standards and position you for success as the economy and your businesses recovers.
photo credit: Macleans