Experience with reducing employee hours
Experience with reducing employee hours
(OP)
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?
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?
RE: Experience with reducing employee hours
And unfortunately, it's not like they can go down the street and get the same job.
RE: Experience with reducing employee hours
Mathew
Website Design and Development
RE: Experience with reducing employee hours
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
RE: Experience with reducing employee hours
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
www.bluetechnik.com
RE: Experience with reducing employee hours
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.
RE: Experience with reducing employee hours
Rafiq Bulsara
http://www.srengineersct.com
RE: Experience with reducing employee hours
RE: Experience with reducing employee hours
Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services
www.infotechpr.net
RE: Experience with reducing employee hours
Maybe talk about the benefits of a longer weekend if everyone goes to a 4-day week? Or would that sound patronizing?
RE: Experience with reducing employee hours
According to the bean counters, this was more effective at reducing expenses than simply reducing hours.
RE: Experience with reducing employee hours
RE: Experience with reducing employee hours
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.
RE: Experience with reducing employee hours
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Experience with reducing employee hours
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.
RE: Experience with reducing employee hours
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.
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Experience with reducing employee hours
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
RE: Experience with reducing employee hours
A few engineering firms are doing this.
RE: Experience with reducing employee hours
RE: Experience with reducing employee hours
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
RE: Experience with reducing employee hours
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Experience with reducing employee hours
gjc
RE: Experience with reducing employee hours
Back to the point of this discussion, when the bad times come, axe your C's. As all the A's and B's know who they are, there is minimal morale impact.
RE: Experience with reducing employee hours
The problem with that sort of system is once the C's are fired, the B's become the bottom rung of the ladder. Just as in society, there must always be a C to remind the B's to work hard. So which B's become the new C's? That ought to have an impact on morale...
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Experience with reducing employee hours
The only situation that workforce reduction is less preferable to across the board pay cuts and furloughs, is where there are company pensions and large exit costs associated with downsizing.
RE: Experience with reducing employee hours
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Experience with reducing employee hours
As far as a reduced week, there is still a pitfall in that, from the salaried employees perspective: You are essentially making them an hourly employee (in actions only) for the downside of things. When everything is moving right along, you want them to work 50 hours for nothing additional. This becomes very apparent if you need to suspend the furloughs to meet a deadline. The pay is reduced, but the overall time averages out. That starts to look like just a pay cut then, with shifting of time.
As others have said, if you can cut someone, that may be better, but if you are small and cannot cut, then reduced hours may be the only way. Some sort of incentive offered for when things improve may help to soften the blow.
RE: Experience with reducing employee hours
Come to work on Monday and meet with payroll and my boss so they can inform me that I only get paid for 36 hours because I didn't work Friday afternoon.
I would say that has hurt my morale and I now have a pretty good eye on the clock...
-- MechEng2005
RE: Experience with reducing employee hours
You cannot simply get rid of the "deadwood" or the people you like least. Before enforcing redundancy on anyone you have to offer voluntary redundancy to all and it is usually the best people that you would least want to lose that would find it easier to find other work and take the offer. This is just one of the reasons it is very difficult to compete in a global market place from within the UK.
From a company perspective it is still probably best to shed staff and take them or others on later when you could offer reduced pay and benefits unless the market suddenly goes through the roof, personally I don't see that happening any time soon.
However if you have loyal, understanding and hardworking staff who you wish to keep and keep as happy as possible, reduced hours and pay is probably a better way to go.
The one thing you don't want to happen is to keep people on and effective subsidise them through hard times only for them to walk out the door when things improve because company B who laid off staff and kept overheads down can pay a few bucks more.
You are pretty much stuck between a rock and a hard place and whatever you do someone will not be happy about it.
RE: Experience with reducing employee hours
It is indeed quite different between the US and UK. In the US, many (most?) states are "at will", which means they do not have to provide any reason to remove you from employment, they just step you into an office and ask you to return anything that belongs to the company. As I understand it, in the UK it's darn near impossible to get rid of dead weight.
Mech,
If you're in the States, they cannot legally bar you from pay if you worked the hours. They can have a hefty fine levied against them if they're found out pulling that kind of stuff. If you're in the UK, well, I won't guess what rights you might have, but considering the UK is very worker-friendly, I can't imagine it would fly there, either.
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Experience with reducing employee hours
Only in few union & govt jobs (& maybe a couple of states) does it take '3 acts of God' to get rid of someone.
I believe the OP is in the US, most likely in an at will state where employers have a lot of freedom legally.
Each round of lay-offs here had distinct 'flavors'.
The first 2 rounds were folk that had upset management at some point.
The next round was some more folks that weren't management fav's plus some general under achievers/less qualified staff etc.
I can't remember the next couple but the next one I remember they basically shut down one side of the business and only the real cream of the crop from that side were kept and got rolled into the other side.
The next couple of rounds seemed to target people who were over payed for their current roles, for example ex managers who'd returned to technical roles or managers who barely had any staff left.
In all of these there was a 'personality contest' element. For instance, I don't think that anyone that regularly goes jogging with our VP got let go.
What is Engineering anyway: FAQ1088-1484: In layman terms, what is "engineering"?
RE: Experience with reducing employee hours
There is no requirement to offer voluntary redundancy to anyone, unless that is a condition of a collective agreement or something that walks and talks like one. Most engineers here do not belong to labour unions but some do.
If they find another job such that they're not "ready to return to work" when you call them back from temporary layoff after some reasonable period (I seem to remember the magic number being somewhere in the neighborhood of three months or less), you owe them no severance payment as they are deemed to have voluntarily left your employ. Seems unfair, but that's the way I understand the law to be here.
If you hire someone else for a similar position without calling those on temporary layoff back to active duty first, you owe the people on layoff a severance, and probably some punitive damages for behaving like a jackass as well- but only if they choose to take you to court.
The only time you need to prove cause for dismissing someone as "deadwood" is when you do not wish to pay the severance and other associated costs. It is of course easier to negotiate a "reasonable" severance (i.e. lower than the industry norm) with someone you consider to be deadwood if you have noted any deficiencies in their performance, in writing, and afforded them opportunities to improve.
RE: Experience with reducing employee hours
Dan - Owner

http://www.Hi-TecDesigns.com
RE: Experience with reducing employee hours
#1 Cut the B-team NOW. You will be immediately relieved by not having them around and so will your A-team. I held onto mine too long, thinking I could make the necessary sales and not realizing that it was a global issue and nothing I could control.
#2 Have a meeting with everyone and discuss the issues at hand. You should have already taken a pay cut if you are going to ask them to do the same. If you have not then you should or you should lay off one of them and take over their work (you need to show that your are doing more work for less pay).
When we did this, our people readily volunteered for the 4-day week. Once we got our financial situations figured out with the pay reduction, I think we all enjoyed the shorter weeks.
My company morale changed because one of my A-teamers turned out to have much less intestinal fortitude for hard times. He was a good technician, but expected to be fed like a baby bird and never have his life interrupted by work. He started to taint other a-teamers (through general b!tching) and I fired him with extreme prejudice one afternoon. Morale is great again, except for me because I am having to do all the work of the guy who I fired.
RE: Experience with reducing employee hours
Personally it was tough financially but I began to really enjoy the extra day off. Now that we are back at full time & full pay I miss having
RE: Experience with reducing employee hours
What it sounds like you're saying is that the employees at your place took a pay cut to provide a benefit to the business, but the only benefit they themselves got was the time off, and the chance to hang onto their jobs. If that's the case, it's very normal but a little sad. Employees need to be treated by the owners as partners in the business. Wage reductions or lost time during slow times, or uncompensated overtime or superb performance during good times, need to be viewed as an investment of "sweat equity" in the business, every bit as valuable as if it were money used to purchase shares. Otherwise, employees who are treated as if they were just employees cannot be faulted for behaving that way.