How to Handle Labour Surplus
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By: Wilhelm Schnotz

In a perfect world, the only labour problem a Human Resources Manager or a small business owner would face would be that of a labour shortage caused by expansion of his business too quickly to keep up with staffing. In reality, however, you’ll need to face downturns in business that leave you with too many workers than you need to meet the demands of your business. While most businesses can weather a short-term labour surplus, Human Resources Managers must develop a strategy to eliminate unnecessary costs associated with excess employees.

    Implement a hiring freeze

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All companies can expect a bit of churn on their labour force simply because of their employees’ life situations, with workers leaving for other positions or retiring. By not filling the positions left by these departures, managers can let workforce attrition balance labour surpluses without having to resort to layoffs.

    End outsourcing contracts

In many cases, it may be as cost-effective to shift work responsibilities back to employees. While this creates corporate self-reliance, the rise in on-site responsibilities can be absorbed by your excess workforce. This strategy is only viable when there are in-house workers of the same skill level and pay rate as those employed by the outsourcing company.

    Begin a mandatory furlough system

By requiring all employees to schedule an unpaid week into their upcoming long-range schedule, you reduce the burden of labour cost while providing employees with a substantial benefit time off which has a smaller impact on morale than across-the-board pay reductions. You must be extremely careful to forbid labour regulations which exempt employees from performing any work during their leave, as that may endanger their exempt status.

    Offer early retirement or buyout plans for workers with seniority.

These offers not only help to eliminate excess employees when workers take advantage of the offer; they tend to remove workers with the highest salaries, which has a combined cost-cutting effect.

    Reduce workers’ hours or pay across the board.

While these strategies typically negatively impact worker’s morale, these reductions directly impact the primary problem of cost containment associated with excess labour.

    Layoff excess employees

This is the last option to be considered in this case if all the above steps are not effective.  Layoff strategies may be determined by seniority status, individual or collective employment contracts or on a case-by-case basis.


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