Keeping costs at a minimum in this turbulent economy is top of mind for employers. At the recent Managing the Workplace During an Economic Downturn seminar in Toronto, lawyers from Heenan Blaikie’s Labour, Employment and Pensions Practice Group provided some options to help set employers’ minds at ease.
While laying off employees might be an employer’s first reaction to save money, downsizing or “rightsizing” is not always the best choice, says John Craig, a partner with Heenan Blaikie.
Rightsizing can have a positive long-term impact by structuring the workforce to reflect the reality of the markets. However, it can be expensive in the short term due to the costs of severance packages and potential litigation. “Employees may be more aggressive [to pursue legal action] because they feel they have nothing to lose,” says Craig.
Craig also indicates that those remaining employees can feel the impact of rightsizing if they’re wondering who’s next to go. “You may lose your strong performers because they may [simply] want to go somewhere else.”
If you don’t want to rightsize…
There are options other than rightsizing that employers can use such as reduced compensation, reduced benefits, vacations/sabbaticals/leaves of absence, reduced work hours, job sharing or early retirement/voluntary separation packages (VSPs). While all of these solutions will help to avoid layoffs, many of them come with caveats.
Reducing compensation will help to avoid reducing employee head count. “Instead of losing bodies, the employer can retain the number of employees it has,” says Craig. Similarly, an employer may consider reducing or eliminating benefits or changing benefits providers to save costs. However, when any change is pending, the employer runs the risk of employees making legal claims against the employer.
Employers need to check their contracts for “favourable language,” says Craig. In the event that the employment contract does provide for a change, employers should have the employees consent to changes through a signed agreement and provide reasonable notice of the intended changes.
Reducing work hours (such as cutting back from a five- to a four-day workweek) and job sharing (in which two or more employees share one job) are both good options to address short-terms needs, reducing labour costs and staffing levels while retaining employees. Yet job sharing adds a layer of complexity.
Job sharing raises management issues, as the employees have to coordinate tasks and communication. “Most of my clients are not interested in job sharing because they find it onerous,” says Craig.
Similarly, early retirement and VSPs can also help to cut costs and staffing levels while preserving morale of the remaining employees. “Employees are only exiting if they choose to do so,” says Craig. However, non-unionized employers that are considering such options, should take care to avoid human rights challenges, such as targeting a specific group—for example, older employees—for these options.
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