4 Ways to Trim Payroll Without Layoffs

Wednesday, July 16, 2003

Wells Fargo, http://wellsfargo.m0.net/m/p/wls/sta/article10.asp?ck=TrimPayroll&diid=9523415705HX215998MD773920419

Here are four ways to control labor costs without pink slips.

Whether you have a small or large contingent of employees you may be wondering what you can do to lower your costs without layoffs. But there are creative ways to trim payroll costs without layoffs and still keep your workers happy.

1. Share employees with another business, says Jim Oliver, founder of San Antonio-based Jim Oliver & Associates, P.C. One of his clients, a physician, opened a second office but realized it was overstaffed. So the physician arranged to share his bookkeeper with Oliver's seven-person firm.

Oliver also cross-trains his employees. He saves money by outsourcing fewer tasks such as courier deliveries. "Sometimes you have someone who's real busy and another person who's not," he says. With cross-trained employees, someone else can help pick up the slack and get the job done more quickly—which means fewer payroll hours.

2. Offer flexible hours, says Nicholas D. Nauman, CPA and principal at Doyle & Keenan, P.C. in Davenport, Iowa. You can adjust schedules and still
Your business type can help determine your methods of trimming payroll.

Service firms—Offer flexible hours. This will be easier for you if you experience heavier volume at different times of the week. Allow employees to work 10 hours a day, four days a week. Split shifts during certain days can also apply manpower where it is needed most without paying for full staffing during slow periods.

Sales firms—When sales are down, redefine and refocus your employees' roles and responsibilities. Consider cross-training workers to do other things. An employee who is not as busy could become a new salesperson or be appointed to create new markets or products.

Manufacturing/Contracting/
Agricultural firms—If you're a manufacturer, manage your business closely to avoid paying overtime. If you're a farmer, keep workers productive with other tasks—such as fixing a fence or repairing a piece of equipment—while you're waiting for the harvest.



cover all of your business operating hours, he says.

Nauman is formalizing a flexible hours plan for Quad City Arts, a nonprofit organization in the area. "They have a lot of events at night. They're not working 8 to 5. How do you count the hours and pay them? We are trying to match their events to a 40-hour week and trade hours," he says.

He also says you can avoid paying overtime by allowing compensatory time, provided you don't run afoul of wage and hour laws. Each state is different, so have a CPA or attorney who knows the laws review your plan, he says.

In early June, Congressional opponents postponed attempts by Republicans to introduce legislation that would have allowed employers to offer hourly workers compensatory time off instead of overtime pay. Under the bill, which may be introduced later in the year, businesses would be allowed to give workers a choice between overtime pay or compensatory time off, both calculated at a time-and-a-half rate.

3. Hire part-time, seasonal or temporary workers, says Emily M. Reich, CPA/ABV and partner at White, Zuckerman, Warsavsky, Luna & Wolf certified public accountants in Sherman Oaks, Calif. Her client, Superior Metal Spinning in Santa Fe Springs, Calif., is a manufacturer of lighting products and keeps a minimal number of employees on staff. If more orders come in, the business hires more people and tells them the duration of their stay depends on future sales.

"We're talking about people who have been with that business a long time," Reich says. "They understand. If they don't find another position in the down time, they come back when business picks up."

Reich adds that small businesses should consider students, family members, stay-at-home moms and retired seniors as potential part-time employees. "Limit benefits to full-time employees and save on health insurance, compensated absences and other benefits," she says.

4. Openly communicate, especially if you have a small tight-knit staff, says Joseph F. Shevlin, CPA. He works in the Helena, Mont. office of Great Falls, Mont.-based Junkermier, Clark, Campanella, Stevens, Certified Public Accountants and Business Advisors.

Employees should understand your business's financial constraints long before you are faced with trimming hours. Otherwise, he says, "It puts economic pressure on them to moonlight or be dissatisfied with you, which causes them to look for another job."

"If you make the decision to trim payroll without reducing bodies, then sit down and tell them what's happening, why your sales are down. Maybe you can put it back to your employees to get some input," Shevlin says. "Someone might say, 'I want to work part-time,' or, 'I was going to quit and move to Boston, anyway.' If it's a tight group that wants to keep their jobs long-term, they may each decide to take a cut of a few hours a week."

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