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When Your Company Can’t Get Any Leaner!

24 Apr

Has your company’s overhead suddenly become a problem? Have your sales declined so much that your current cost structure simply isn’t sustainable? More importantly, have you decided to reduce costs, but are unsure of how to proceed, or where to focus your efforts? Well, you’re not alone. In what many economists now call the “Great Recession,” companies everywhere are scrambling to reduce expenditures. It’s a reality of today’s business environment; companies must reduce costs or suffer the consequences. It really is that simple. However, what can companies do when they’ve exhausted all options? What can they do when they simply can’t squeeze anymore? In a world where enterprises are touting the benefits of being lean, what can companies do when they just can’t get any leaner?

Should We Use Layoffs or Reduce Salaries?

Given this most recent recession, most companies have done their best to reduce expenses. However, at some point, these companies face the ultimate decision: should they pursue layoffs, reduce salaries, or both? Unfortunately, there really isn’t a definitive answer as to which strategy is best. Some argue that companies should focus on making deep cuts to their workforce, deep enough that they can immediately return to profitability. Others argue that companies should instead focus on across the board salary cuts. Yet, others claim that a combination of layoffs and salary cuts works best. Unfortunately, all of these actions inevitably lead to a substantial decrease in service capabilities. So what can companies do when they must reduce costs but are reluctant to go with these aforementioned options?

•             Outsource Payroll

Today’s companies save a tremendous amount of money by outsourcing their payroll to corporate payroll services firms. For instance, UK employers must meet stringent PAYE requirements. In Canada, there are a different set of rules pertaining to the Canada Revenue Agency, and how employers should be compliant when withholding taxes. In the United States, it’s the IRS. Each agency has a different set of rules governing how employees are paid. Each has a different set of rules on how corporations pay taxes. Finally, each has different criteria concerning withholding amounts. It can become a recipe for disaster. However, it’s less of a concern when using an outside payroll firm. In addition, outsourcing can save a considerable amount of capital.

•             Work Share Models

Most countries have provisions that allow employers to benefit from work share models. Employees work a reduced number of days. On those days where the employee doesn’t work, he or she receives unemployment insurance. The company is able to reduce its costs, while employees are able to retain their jobs. Work share models allow companies to retain high value employees without fear or concern that those employees will leave. This practice is often welcomed by both employer and employee. The impact in lost revenue is often made up by the unemployment benefits the employee receives. Work share programs are also ideal for companies who operate in cyclical and seasonal markets. These programs allow companies to match their workforce levels to their market’s business volumes. Meanwhile, employees are confident that their workload will increase once the market rebounds.

This recession has certainly taken its toll. Companies are understandably apprehensive about the future. As such, they have downgraded their forecasts and have adjusted expectations to coincide with this new reality. Outsourcing payroll management is one option that reduces costs without resorting to salary reductions and layoffs. Work share programs are also a proactive means of reducing costs. Both are solid options for today’s enterprises.

This guest post was written by independent journalist Patrica H. Hugley who frequently blogs about company finances and payroll services.

 

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