4 Alternatives to Layoffs for Small Businesses

By: on May 6, 2020

NOTE: This article is intended to inform our readers about business-related concerns in the United States. It is in no way intended to provide legal advice or to endorse a specific course of action. For advice on your specific situation, consult your legal counsel.

There’s a chapter in almost every business’ story where tough decisions are made to keep the lights on. No matter the circumstances that lead up to that moment, business owners are responsible for making critical decisions that will not only keep them afloat, but set them up for future prosperity.

In times of crisis, amid pressure to act fast, downsizing may seem like an obvious option to quickly cut costs. But layoffs are a drastic measure that can leave a lasting mark, especially on small businesses where employees wear many hats and coworkers often feel like family.

Try these 4 cost-cutting strategies before resorting to layoffs

If you’ve found yourself tasked with the responsibility of turning a tight financial situation around, don’t panic just yet. You may be able to avoid downsizing with these four alternatives to layoffs.


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1. Slim down employee benefits

A quick Google search will confirm that employee benefits are the one of the first places you should look when it comes to lowering expenses, and it’s no surprise why. Some studies show that benefits cost the average employer $21,726 annually per employee. Even with a handful of employees at a small business, that quickly adds up.

There are a few ways to reduce the cost of benefits, depending on what you currently offer.

Start by eliminating any fringe benefits you provide such as wellness programs, tuition reimbursement, or commuter benefits. If you offer retirement savings contributions (like 401(k) matching), suspending or reducing those payments will also afford significant savings.

While you want to avoid eliminating health insurance, there are a few ways to reduce the cost of health insurance without compromising the quality of your employees’ coverage. One option is to offer a High Deductible Health Plan (HDHP) and encourage your employees to take advantage of a Health Savings Account (HSA), if available, to offset any expenses they incur before reaching their deductible.

2. Reduce office costs

Office costs can include everything from pens and paper to water and electricity bills. The easiest and most effective way to reduce office costs is to ask your employees to telecommute. Emptying the office means you can turn off the lights and thermostat, unplug the electronics, and stop stocking the breakroom with snacks and coffee.

If it’s not possible for your employees to do their job remotely, there are still ways to reduce expenses associated with your physical office space. Some straightforward options include powering down and unplugging electronics that aren’t being used, switching from hard copies to digital documentation, and turning off lights at the end of the workday.

It’s also worth taking the time to meet with your commercial insurance broker to discuss any wiggle room in your policy. Ask if there’s any overlapping coverage in your plan and if they have suggestions for ways to reduce your premium.

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3. Consider free or open source software

Another way to reduce expenses is to replace your current software with free or open source alternatives. From payroll solutions to time and attendance software, almost every kind of software your business needs is available in a free or open source form.

Free solutions often come with limitations (such as a lack of professional support or less functionality than a paid system), but switching to free software can save you up to $49,000/year.

If you’re not sure where to start, our expert software advisors are here to help. Schedule an appointment with an advisor for a free, no-obligations 15-minute consultation to determine what free software options could work for your business.

4. Negotiate with suppliers

When was the last time you renegotiated prices with your suppliers? If it’s been a while, take the time to call and discuss your arrangement, and see what discounts they can offer.

Additionally, reach out to your supplier’s competitors to see what they’re offering. Whether you intend to change suppliers or not, there’s an advantage to knowing your options. Getting quotes from at least three suppliers will give you an idea of what’s standard, and communicating to your current supplier that you’re researching other options can encourage competitive pricing.

Even for long-standing partnerships, there is always room to improve the terms of your agreement. Some vendors may offer discounts for paying invoices early, while others might benefit from bulk orders and less frequent deliveries. Remember: The key to negotiating is to ensure the partnership is mutually beneficial.

Analyze your expenses, protect your employees

Every small business is different, but one thing they all have in common is the desire (and intent) to protect their employees.

While a service-based business may not have suppliers to negotiate with and an organization that’s already 100% remote may not have office costs to cut, get creative with the avenues you explore to help cut expenses and retain employees.

For more cost-cutting and business continuity help, check out these additional resources from Software Advice:

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