Layoffs or pay freezes?
Our company is in some financial trouble and there’s no way around making cuts regarding employee pay. We are still mulling over our options--namely, whether it’s best to select employees for layoff or to institute a freeze on everyone’s pay. Obviously, we’ve got some number-crunching to do (including determining whether we can function efficiently with fewer employees should we choose layoffs).
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In the meantime, I thought I’d ask--all things being equal, in such a situation do you think it’s better to just layoff some employees and keep the “survivors” relatively happy by not instituting pay freezes?
Or would it be better to send the message—“We’re experiencing tough times: the good news is we are going to be able to avoid layoffs (underscoring that all of our employees are important to us), but the bad news is we can’t afford to give you raises?”
Any insights--particularly from those of you who've been in such a situation before--would be most appreciated! Thanks
Comments
We chose to do pay DECREASES rather than layoffs...I would have been very happy with a freeze actually.
That said, what has been stated is that if we meet/beat our budget, a percentage of the excess will go towards incentive/bonus pay.
I agree with Regdunlop in the fact that bonuses have a lower cost over time because of the compounding issue. And they can help in a situation where the great performer decides to kickback for a while on a higher salary than deserved....if they are truly performance based.