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Creativity can reduce the need for layoffs

(ran NP, CI editions)

Perhaps you've experienced a work force reduction. Maybe you know someone who was part of a corporate downsizing or belt-tightening.

Layoffs are called many things, but the result is always the same. People lose their jobs. Tens of thousands of employees have been fired this year or learned they were on the short list for a trip to the unemployment line.

For most owners, layoffs are the cut of last resort. Payroll typically is the largest business expense, but rare is the operator who looks at personnel before finding other areas to trim. Savvy owners padlock the travel budget, eliminate training programs or delay buying new equipment before handing pink slips to the rank and file.

Even when layoffs seem the only option, a little bit of creative thinking can forestall mass firings. That's what George Tyson and Blaine Hemlick found. The two are partners in Talon Digital, an Oviedo company that puts information on the Internet.

Talon has a staff of 10, but because business is slow, Tyson has encouraged most employees to take part-time jobs. They work at Talon as needed when new contracts come in.

Tyson also loans employees to other companies for projects. The employee may work a couple of days or a couple of weeks. Either way, the financial burden of the salary is spread across two employers instead of one.

"I could not afford to pay 10 people full time. There is no way," Tyson said. "We don't have the business to support that."

Business owners considering employee cuts should know exactly what is needed to turn things around. Is the shortage a few thousand dollars a quarter or a few hundred thousand?

"Figure out how much to cut and for how long a period of time," said Bob Wacker, a small-business counselor at the Service Corps of Retired Executives in Orlando. "It may be appropriate to lay some people off, but there are other alternatives."

Analysis is vital. Many companies have laid off employees only to rehire the same person on a contract at three times the previous salary. That's why many companies that reduce staff find the savings aren't near what they thought they would be, Orlando consultant John Curtis said.

Other companies cut too deeply, leaving a staff so thin that customer support suffers.

If loaning employees isn't an option, business owners can freeze salaries for six months to a year. The savings add up: A 4 percent pay increase for a $30,000-a-year employee costs a company $1,200. Multiply that by a staff of 25 people and the savings is $30,000, or one employee's annual salary.

Employers also might reduce hours or ask employees to take a pay cut. Owners should make clear the length of time the cut will be necessary and be willing to cut their own salary.

Five years ago, Bruce O'Donoghue, owner of Control Specialists Co. in Winter Park, was experiencing a downturn and cut salaries, including his own, by about 20 percent. "We had to get through a tight squeeze and didn't have the cash," he said.

His employees stuck with him during the six months of reduced salaries. He also discovered Florida had a special compensation fund to help during a short-term reduction in hours. Employees received unemployment even though they had jobs.

There's also the option of giving employees a one- to two-week unpaid vacation. Staggering these breaks over six months can save thousands of dollars in salary and help the business stay afloat.

Tyson of Talon Digital said keeping the staff together has helped when new contracts come in. Tyson can ramp up quickly.

"I don't like tossing people out on the street," he said. Aside from the moral concerns there is a bit of practicality at work, too. "Their skill sets are too unusual," he said. "To replace them would be very, very difficult."