Reductions in force or employee layoffs are attempts by employers to reconfigure their workforce. Reductions in force are becoming increasingly common in nears all industries and are often caused by organizational restructuring following merger or acquisition activity. A reduction in force is sometimes used to make an organization more competitive by reducing costs. The workforce reduction of organization is discussed below.
Organizations reduce the size of their workforce for three main reasons:
- Lack of adaptability in the marketplace,
- And a weakened competitive position within the industry.
In all regards, efficiency is a major driving force: In many organizations, labor or payroll is one of the largest expenses.
This is particularly true in service organizations, which are making up an increasingly significant portion of our economy and gross national product (GNP). Efficiency is sought by attempting to reduce labor costs and accomplishing more work with fewer individuals by redesigning work processes.
Reinvestment in an organization’s stock price often skyrockets when layoffs are announced to create expectations among investors of improved short-term financial performance.
Workforce reduction of organization
Employers who conduct layoffs often provide affected employees with 60 days’ notice and immediately relieve them of their job duties. The employees remain on the payroll for two months but are able to use the two-month period to adjust, seek new employment, and transition out of the organization.
This not only assists the employee in his or her transition and job search but hut it also helps to ensure that laid-off employees will be less likely to file for unemployment compensation insurance.
State unemployment compensation insurance programs are funded by employers, with the percentage rate determined by the use of the funds by the employer’s former employees.
An employer who lays off a large number of employees who tile for and collect unemployment compensation will have to reimburse the compensation insurance program proportionately.
To facilitate the transition (and ensure that their unemployment insurance payments remain lower), many organizations implement out-placement programs for laid-off employees.
Out-placement services, which may be conducted in-house or contracted to an external vendor, assist not only with helping laid-off employees land on their feet but also serve as a public relations tool.
These services help to retain the support and goodwill of remaining employees by making them feel that they will look out for them if future reductions are necessary.
In addition to helping maintain the tile morale and motivation of remaining employees, outplacement programs reduce the risk of litigation by disgruntled former employees.
Realizing that in certain circumstances it might be unrealistic impossible, or unfair to require employers to provide such written notification. But there are some exceptions. These exceptions are for
- A faltering company that is actively seeking capital to retain its scope of operations and reasonably believes that giving employees warning will jeopardize the financing,
- An ‘”unforeseeable circumstance,” such as a strike at a supplier’s business,
- A natural disaster, such as a fire, flood, earthquake, or hurricane, arid
- Any operation set up as a “temporary facility,” where employees who were hired were informed that the facility employment was nonpermanent.
Layoffs can sometimes be avoided through proper planning. The main benefit of strategic human resource planning is to ensure that the supply and demand of employees are equated while avoiding the costs associated with severe over staff and understaffing.
Effective human resource planning in most instances can reduce or eliminate the seed for any kind of large-scale reductions in force or layoffs. Regardless of the size of the surplus, employers must identify the real reason for the excess number to determine an appropriate response.
This strategic perspective determines whether the surplus is expected to be temporary or permanent in order to assist in developing a plan of action with a corresponding time frame.
For example, longer-range surpluses can often be managed without the need for layoffs by utilizing hiring freezes, not replacing departing employees, offering early retirement incentives, and through cross-training of certain employees to allow them to develop skills that the organization anticipates needing.
Short-run surpluses can be managed through loaning or subcontracting employees, offering voluntary leaves, implementing across-the-board salary reductions, or redeploying workers to other functions, sites or units.
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