Experience with reducing employee hours 8

[UDP10]

To this point in the troubled US economy, my company (HVAC consulting) has been extremely fortunate and remained busy and profittable. Things have recently really started to slow down. Our backlog of work (typically 4-6 weeks) has dried up down to week by week. We are not keeping everyone busy consistently and my partner and I are toying with the idea of reducing work hours. We think the big picture for our company is good and don't want to lose employees but just don't think we'll have steady work for a few months.

The question I have to the forum is if any other employers have experience with this decision. Obviously, anything we decide to do will be based on our specific situation. I'm not necessarily looking for advice as much as experiences. We are a young company and haven't faced this type of decision before.
Did a moderate reduction in payroll/tax (~8hrs per week) do more damage (morale) than good (keeping people busy/overhead reduction)?
Were there side-effects that weren't anticipated?

 

[JedClampett]

Other offices in our company have reduced hours. It's horrible for morale, but employees know what the score is. If hours are reduced 20% and they still have a job, it's better than one out of five of their neighbors (or themselves) being let go. And the company is showing they're valuable enough to try to make every effort to keep them.
And unfortunately, it's not like they can go down the street and get the same job.

 

[mathew1204]

That sounds more like a recession based development rather than a employee based development bcause employuees will lose income not a good sign of things to come.


Mathew
Website Design and Development

 

[MacGyverS2000]

As an employee who has been let go on multiple occasions, it sucks, but I always found another position within a few months, and I hear the office as a whole rebounded eventually (usually). As an employee that has had his pay reduced along with everyone else, I would say it destroys moral throughout the entire office.

So, do you want to hurt one person but give the entire company a fighting chance to survive, or do you want to be a "good employer" and try to limp through a bad situation by making everyone in your employ miserable? Not an easy call...

Dan - Owner

http://www.Hi-TecDesigns.com

 

[tygerdawg]

It would depend largely on your company culture, wouldn't it? If your company is run from dictates from up on high, then everyone would tend to be dependent on that for their thinking & planning. If the culture is more "we're all in this together, pulling on the same set of oars," then the results may be quite different.

I've seen it both ways, I've been on the receiving end of decisions like this. Personally, I would have taken a pay cut to stay actively employed. I remember one co-worker who saw his layoff coming and went to managers to ask if he could be reclassified to a lower level ("broom pusher") so that he could remain employed, albeit at a lower level. Another friend used an opportunity like this to go on 20-hour weeks and pursue his dream of studying for the Ministry. But he aggressively reduced his lifestyle to fit the reduced income (e.g., living in NC, but refused to run his air conditioner!). And that's what it's all about, isn't it? But most folks can't seem to find it within themselves to make the necessary sacrifices.

IMHO the reduced pay could be most acceptable if the employees had a feeling of being involved with the health of the company in deeply troubled times. AND if pay reductions were across the board...including yours. Just how far are you willing to go to ensure the long-term survival of your company (which includes loyal, motivated, trained, and competent employees when the corner is finally turned) ? If I was in your situation, I would pursue that, but actively seek my employee's involvement with the process. And then I'd try to get creative and seek local or state business development assistance for, perhaps, employee training on the subjects of home budgeting or living on reduced income. After all, all those fat cats in your government have a vested interest in keeping your employees working, too.

TygerDawg
Blue Technik LLC
Virtuoso Robotics Engineering

http://www.bluetechnik.com

 

[moltenmetal]

If there are obvious candidates for layoff, it's an easy decision. The "A" team may tolerate a work hours reduction but only if the deadwood has been pruned FIRST. High performers do not look kindly on being forced to subsidize their lazy or stupid colleagues.

If you're down to the "A" team, that's a tough situation. Layoffs of good people or reduced work hours for everybody- either can be demotivating. If you're REALLY down to the "A" team, reduced work hours would be my personal preference because it is the least disruptive to everyone- unless the whole office are a bunch of interchangeable jobs with no work differentiation whatsoever. I'd pair that work reduction with a promise, in writing, of a share in profit if and when the good times come back. That's only fair- you're asking them to forego some revenue as an investment in the future success of your business. Otherwise, you can expect to see some, probably the best amongst them, using that time off to look for another truly full-time job.

In some jurisdictions, government "work share" programs will cover part of the shortfall for the affected employees. That makes the hit even more tolerable.

 

[rbulsara]

What moltenmetal said..

Rafiq Bulsara

http://www.srengineersct.com

 

[greenone]

Keep an eye on labor law-if employees are not paid hourly, you could have trouble paying them for say, 32 hrs/wk rather than 40-you would need to reduce the overall salary and not as an hourly pay rate.

 

[PeterStock]

Dont forget to reduce your salary as well. That would make the blow easier to take. But you can be sure that some of your employees would be looking. If they are not already looking.

Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services

http://www.infotechpr.net

 

[SLTA]

Whatever you do, don't just put some people on part time. It creates a weird caste system within the company.

Maybe talk about the benefits of a longer weekend if everyone goes to a 4-day week? Or would that sound patronizing?

 

[TheTick]

Last year, my employer instituted a round of one week layoffs. Everyone had to pick a week (we actually had the luxury of choosing when to be laid off!).

According to the bean counters, this was more effective at reducing expenses than simply reducing hours.

 

[crossframe]

Some people here than have been put on reduced hours really enjoyed it. It gave them plenty of free time to find another job.

 

[berkshire]

UDP10
If you really are going to have to do this.
Call an all hands meeting ( everybody no exceptions.) explain the situation,if you think you will have steady work in a few months emphasize that. Then spread the misery around, give everybody a few days on the beach on a random basis. Make sure you keep a tally of who has taken days off, so you can keep it even, at a time like this you do not need to be accused of favouritism. If you have salesmen, do not lay them off, put them on overtime.Explain to the others that these people are essential to getting work. If you have others in your group who do not sell but can do so, get them at it, you need all the help you can get, you may have already done this.
Having said this you are going to lose some people unless you can convince them it is only temporary.
From past experience if you do not do it right you will lose people. If you do it right your losses will be minimal.
B.E.

 

[MacGyverS2000]

Also consider bonuses for any employee who brings in a job (you may have to place limitations of one kind or another).

Dan - Owner

http://www.Hi-TecDesigns.com

 

[rday]

I work for a small consulting firm and we had a similar situation.

We held a meeting and instituted furlough days (1 a week) with each employee picking their own day. This was a measure to keep us all employed and when things pick up we go back to business as usual.

It's not the best for morale, but we're all going through it together. None of us are job hunting.

 

[KENAT]

We had a pay cut for a while last year - though with no corresponding reduction in hours or reduction in work - this was in the middle of several rounds of lay-offs as well. At the same time they also suspended profit sharing.

This was so stupid to my mind.

What would have been better would have been to say, "we're implementing pay cuts because we don't anticipate making a profit for the next few quarters. However, we are increasing profit sharing ratio so if we do somehow manage to make a profit you get to really benefit".

I know not everyone thinks like me, and tax or labor laws or union agreements etc. can limit your options, but just throwing this out there.

Whatever you do, chances are folks wont like it and will probably look for alternatives - though in this market the risk of them actually finding something may not be so high.

Posting guidelines faq731-376

http://eng-tips.com/market.cfm?

(probably not aimed specifically at you)
What is Engineering anyway: faq1088-1484​

 

[casseopeia]

I never had the situation of needing to reduce staff due to a work/economy slow-down, but I think most reasonable people would understand that taking a 20% cut in pay while keeping benefits like health insurance beats the daylights out of being laid off, going on unemployment and paying your COBRA premium. If your staff do not know this, you can give them the option of mandatory furlough days, or being laid off and give them the financial consequence for each individual. Explain what their salary will be during the furlough period, and what benefits will remain. You can even provide them with what their unemployment check will be and what their COBRA premium is. Do not forget that COBRA premiums are subject to the ARRA 65% subsidy (paid by the insurer) for 15 months. This includes dental and medical.

Arming them with the information also looks like you are taking an active role in seeing them through the difficult time.

As far as cutting non-performing slackers, I never needed a bad economy to do that.


"Gorgeous hair is the best revenge." Ivana Trump

 

[rcw retired EE]

Check with your state unemployment office. In Washington State, smaller companies can place employees on reduced hours and the state pays partial unemployment benefits. The employee's take home is just a little less but more than a layoff or a straight cutback. The business costs are reduced and the state pays out less unemployment than if there was a layoff.

A few engineering firms are doing this.

 

[NomLaser]

20% cut is a pretty sizable cut in salary. We just had our salaries reinstated from a 5% cut that lasted nearly a year. I must say that being on the receiving end that you eventually get into the mindset that it won't be reinstated. Then if it does you feel like you got a raise

 

[mtu1972]

The engineering firm I work at has taken a similar approach. 32 hour weeks became the norm when things slowed down in 12/08. The structural department started picking up in 12/09, but our electrical and mechanical groups did not pick up as fast.

The difference was if you had billable work you could work 40 hour weeks so as not to impact schedules, etc. As you can imagine, some people rarely worked 32's and some never worked 40's. Even today you can see empty offices on Monday's or Friday's, or you see individuals playing games on their computers.

Morale has suffered as the "A-team" hoards jobs and others are left wondering if they will ever get back to fulltime.

I think management should have taken a more hands-on approach to seeing that work was dispensed more equitably. I also doubt that the policy will ever change back. When you accumulate some general time, you are reminded that we are still on reduced hours.

In fact, some new employees were brought on to replace retirees, and they were hired with the understanding that 32 hours was the norm.

We do know that we were lucky to weather the worst of it and keep our inurance, etc. Personaly I've been on 40+ hours for 9 months now, but can't help but wonder if it will last.

gjc