Better Retention - Things to Consider Before Reducing Employee Salary * Incedo Group

Better Retention – Things to Consider Before Reducing Employee Salary

When your company isn’t as profitable as you had expected and you have tried to cut costs in all departments, but still, it seems that your expenses continue to grow, then you need to take a different course. Although it isn’t going to please many people, you might be left with only one option, which is to cut down on payroll expenses or employee salary. Reducing your workforce is another solution; either way, no one is going to be happy. Keeping your employees satisfied is important when it comes to hiring and retention, so it is going to be up to you to decide if it is better to let people go, or if it is better to retain everyone but reduce their salaries.

Before making a drastic move that you might regret, you need to think things through first. Here are a number of things to consider before reducing employee salary:

Implement a Freeze Hiring

Work with your current employees and develop efficient strategies to ensure that all the tasks are handled efficiently, without any need for OT or additional people. Hiring more people is more expense for you, which is why it makes sense to implement a freeze hiring. Try to work with what you currently have and maximize your worker’s abilities to get the job done. Hiring and retention isn’t just about getting more people, but maintaining just the right amount of employees is just as important.

Plan for Unpaid Employee Furloughs

Instead of downsizing, you might want to consider furloughs instead. These are mandatory leaves, wherein employees will have to take partially paid or unpaid time off. This reduces the employee time on the job, thus reducing your costs. You could choose to shut down the business for a few weeks, or ask employees to take weeks off without pay. One of the main differences between a furlough and a layoff is that employees continue to receive employee benefits with a furlough.

Put a Hold on Benefit and Salary Increases

With retention in a company, you certainly wouldn’t want to let employees go as much as possible. To avoid that, consider freezing benefit and salary increases. Often, employees are more understanding of this, especially if there is nothing lost on their part. If your company isn’t doing well at the moment, then you certainly shouldn’t be offering increases in salary and benefits. Just make a clear announcement, state why the benefits are held. Most importantly, tell your staff how you plan to solve the situation.

Let Temporary Employees Go

If you have temporary employees, then this is the time to let them go. Keeping your regular employees is always the priority. As much as you don’t want to fire anyone, if all else fails, then this is one of your options.

Also, keep in mind that in hiring and retention, you provide contracts to your employees. You cannot just reduce the salaries of employees with contracts. In order to implement cost reductions, you will have to renegotiate those contracts. Also, consider the consequences of lessening employee pay. Doing this may upset your most valuable employees, who are crucial to the company’s operations. You certainly wouldn’t want them to leave, which is why you should think about alternative other solutions you have available before anything else. Reducing employee salary should always be your absolute final option.