Cut Expenses, Not Staff

Strategies for Cutting Expenses

During tough economic times it’s critical that businesses reduce expenses, especially the largest. Staff cutting should be an absolute last resort regardless of how much of a quick fix it may appear on the surface. So if cutting staff is not the answer, what else can you do in a must-reduce expenses situation?


1. Temporarily cut pay – Although not ideal, this does produce a quick solution to reducing costs and could be used until economic conditions improve.  This needs to be undertaken with sensitivity and in consultation with your employees if you don’t want to affect morale.

2. Temporarily reduce working hours – Instead of staff working a 5 day week or 9am-5pm day, a 9 day fortnight or a 10am-3pm day, with a negotiated pay, could be implemented until conditions improve. This could be delivered under the umbrella of a new flexi-time policy, positioned as a “lifestyle choice”, and may even be attractive to parents with school aged kids or staff with other commitments.  You never know, some staff may also take a likening to 3-day weekends…

3. Leave without pay – Have you considered offering employees the opportunity to take an extended break? Employees may be willing to take leave for 6 to 12 months, without pay or with a small stipend, knowing that they can resume their position at the end of their break. This can be attractive to people who want to go travelling overseas, return to study, or try another profession.

4. Early retirement – If you have older employees in your business then some may be open to early retirement. Also a gradual reduction of hours until retirement may be appealing. The knowledge of these older employees should not be underestimated. You could negotiate for these employees to work as mentors, coaches or contractors even after they retire.

5. Voluntary Retrenchment – If you must retrench staff the reputation and productivity of your business does not need to suffer unnecessarily.  You must make sure that the process of retrenchment is perceived fair by all and ensure that you maintain benevolence. An expression of interest (EOI) opportunity could be provided where the employee chooses voluntary retrenchment and choose from a range of retrenchment benefits.


When considering the above strategies, it’s important to never make assumptions about what someone is or isn’t willing to do or what’s best for them – this includes deciding upon the terms and conditions of any arrangement.   The other important thing to remember is that how your employees perceive the options you present to them has everything to do with the way in which they are presented to them.  Remember, nobody likes to feel powerless or have a decision forced upon them.

Open communication with your team about your business goals and the workings of your business is something that we preach at Business Companion.  The same holds true for your business challenges.   Be honest with your employees – if tough times are requiring that you make some difficult business decisions then it’s best to be upfront with your team about it.  It also gives them a fair opportunity to plan their own exit strategy, rather than you keeping quiet about it and then being forced to make them redundant in a month or two’s time.

Be authentic with your dilemma and distress and give them the opportunity to step up and be the co-owner of a difficult staffing decision.  For example, by putting a range of carefully considered options on the table and asking for their recommendation or allowing them to choose what works best, you allow your team to be the masters of their own destiny.   If you focus on creating an empowering context for your team to powerfully manage their employment and livelihood in these difficult economic times you’ll be able to sleep much better at night, and you never know – if you have a great team they may just surprise you or propose a different solution that may work just as well.