Trying to keep the lights on is challenging for many small businesses these days. But while laying off employees can save the company the expense of salaries and paying for benefits, such a move is often not the most cost-effective answer.
In fact, layoffs can actually cost your business money, especially if you expect things to pick up once the economy recovers.
“It’s hard to save money if the jobs will be refilled within a year or so,” explains Peter Cappelli, director of the Center for Human Resources at the Wharton School of the University of Pennsylvania. “There are lots of costs of laying people off – severance, unemployment insurance, risks of litigation. And then there are the costs of re-hiring – search, training, productivity losses while waiting for performance to get up to speed.”
So if you can’t save money by letting people go, how can you balance the books? Here are five steps you can take to cut costs without cutting employees loose.