Alternatives to Layoffs: Three of the Most Popular Methods

When it comes to saving money or optimizing a workforce, the first idea that pops into many of our heads is to start cutting back employee size by holding a reduction in force (RIF) or other layoff event. But are there alternatives to layoffs that could be used in these situations?

Of course, there are. Layoffs are sometimes needed to achieve the desired impact. However, there are many ways you can downsize your workforce permanently or for a short period of time to allow your business to bounce back and achieve the financial success you need.

While there are countless plans to pull this off, today we’re going to examine three easy ones that many organizations can use regardless of size.

Let’s get started by understanding why you’d want an alternative in the first place.

Layoff Alternatives: Why Bother?

Layoffs are one of those tasks that HR has to perform that is no fun across the board. It’s stressful for you – the HR manager – it’s definitely stressful for those let go, and it’s stressful for the surviving staffers who remain after the event.

It’s also stressful on your company because even if the event is preemptive or is a workforce planning move, outsiders may take it as a sign that your company is struggling and that’s the opposite reputation you want to have out there in the world.

Another big issue is employee dissatisfaction. Those who were let go may turn on you if you don’t hold the layoff event properly. This is why – if a layoff event needs to happen – we strongly suggest HR leaders provide outplacement services for their staff members to ease over these tensions.

Not only does outplacement help your staff members get back to work in a new role faster than them going it alone, it takes a lot of the stress out of the situation for you and the staff member, reducing the rate of lawsuits along the way.

You can learn more about outplacement here.

Now, one way to ensure none of these issues pop up at your company is to not hold a layoff event at all. Layoff alternatives have started to appear in many areas of business, and they can have the same impact as a layoff event without all the stressful side effects.

Let’s get into them.

Voluntary Retirement as a Layoff Alternative

This is a simple one. If you need people to step down, why not ask who wants to step down?

By offering more senior workers – usually those 55 and older – if they’d like to take a voluntary retirement package is a way to reduce your workforce without all of the negativity. A voluntary retirement program can help workers transition into retirement, find a new full-time job or really do whatever they want.

There are a lot of pros and cons to voluntary retirement, though. For example, it could impact how much Social Security the participant receives when they retire fully. You can learn more about those pros and cons here.

Since voluntary retirement packages typically impact senior workers who have been at the company for a certain amount of years, the incentive hits two important areas: reduces your workforce and saves you money because those who take the offer will likely be workers who make more than younger ones.

This creates a sort of win-win for HR and upper management who need to balance the budget.

One of the most important things we suggest you add to this incentive is retirement lifestyle planning, which can help your employees make the switch to retirement as easy as possible.

Retirement lifestyle planning allows upcoming retirees to examine the social and emotional side of retirement, an aspect of retirement that has been ignored for far too long.

You can learn all about retirement lifestyle planning here:

The main goal is to make sure that, since these individuals have worked at your company for decades, you are doing all that you can to make this transition easier. Also, by planning the retirement, you can ensure there is no knowledge transfer loss and that a new leader is ready to step up to the plate and fulfill the duties that the retiree will no longer be handling.

Furloughs as an Alternative to Layoffs

Another good alternative to layoffs is to offer furloughs to staff members instead of letting them go completely.

A furlough is a leave of absence given to employees with the promise of rehiring them later or simply retaining their job for them. The best way to think about this sort of program is to consider seasonal businesses. For example, an ice cream shop may be open all of late-spring and summer, closing as soon as it starts getting cold. Those workers will then not work there until the next season, though they still know they have that job.

This allows the ice cream store to not waste money during winter and also helps them retain workers for the next year. The same can be said for landscaping companies who also work during the warmer months.

For other businesses, furloughs can be used in a similar way.

“Rather than reducing employees’ rate of pay, some employers are shutting down for a few days at a time or mandating that employees take off certain days,” reports the Society for Human Resource Management (SHRM).

By having a person take off certain days or have an extended leave of absence, the business can rebound and start getting back on track. There are, however, many legal issues at play here and these programs can also impact employee benefits, meaning that if a furlough sounds like something your company may do, you need to firmly weigh all of the options.

Here’s SHRM again with some expert tips:

“As long as HR runs a discrimination analysis, the organization can target different levels of employees for furlough. ‘It is legally defensible to furlough a certain level of employee if you have too much capacity there or they are higher-paid,’ says Duston. ‘Targeting higher-paid employees for furlough will get you greater cost savings, but you may damage morale and retention.’”

Besides this type of leave, employers may want to also consider a sabbatical program.

Sabbaticals as an Alternative to Layoffs

First off, what is a sabbatical?

“Sabbatical programs can be a low-cost tool to boost retention, accomplish training and development, and allow employees to recharge. Sabbaticals are common in academia, but are relatively rare in the business world,” SHRM reports.

“In the private sector, sabbaticals may be particularly useful in fast-paced, high-stress fields, such as high-tech or finance, and in industries with considerable competition for talented employees.”

Typically, a sabbatical is a paid opportunity for creative or academic staff members. It’s a way to refresh them, allow them to work on unique ideas or pursue some endeavor. However, there is also an unpaid sabbatical option that works quite like a furlough.

By offering unpaid sabbatical, you can see what employees may want to take an extended period of time off to pursue personal goals or develop more in their careers by possibly working elsewhere for the duration of time. Either way, it has the same effect as the furlough where you no longer have to pay a salary for awhile while your business bounces back from whatever hardship it might be facing.

Layoff Alternatives: Final Thoughts

We’ve covered quite a bit here. These three methods are some of the most common alternatives to layoffs. However, there are tons of other options, too. For example, you could freeze hiring, reduce budgets, shorten your work week, and many others. The goal of most of these plans is to give your company a bit of time to bounce back financially while retaining your talent.

Others, like voluntary retirement, offer an out for certain members of your company but not forcing them to take it.

At the end of the day, it largely depends on your corporate culture as to what path you take. Just because a plan looks good on paper doesn’t mean it’s a good fit for your organization. Also, if you do choose to implement any of these changes, make sure to lean on your legal counsel to ensure everything you are doing is compliant with local, state, and federal laws.

Want to learn more about voluntary retirement? Check out our cheat sheet:

Josh Hrala

Josh is an HR journalist and ghostwriter who's been covering outplacement and offboarding for over six years. Before pivoting to the HR world, he was a science journalist whose work can be found in Popular Science, ScienceAlert, The Huffington Post, Cracked, Modern Notion, and more.