Tag Archives: payroll

Can you cut your payroll and still keep employees happy?

Most small businesses have already done some belt tightening this year. We’ve trimmed dead wood, become a more lean machine, and every other metaphor you can apply to spending less money. Still, when we see our final projections of where our year-end financials will end up, we might  wonder if we should cut a little more.

Sylvia Ann Hewlett, founder of the Center for Work-Life Policy, wrote in the New York Times this weekend about a creative approach to cutting costs by trading employees money for time. She cites the example of KMPG, the giant accounting firm, and their solution to cutting payroll costs without losing star talent. They presented 11,000 employees with a Chinese menu of choices: work a four-day week and take a 20% pay reduction; take a short sabbatical while earning 30 percent of their base salary; both of those options; or neither of those options, retaining their regular salary for their standard work week. Over 80% of them chose one of the flex options.

Hewlett points out that because KPMG positioned these options as “a strategic response to the downturn, rather than a ‘benefit’ for working mothers, it has gone some distance to legitimizing flex time. Taking this option has become an honored choice — a way to save jobs. As a result, overloaded men as well as overloaded women have felt free to vary their schedules.”

I’ve seen one small company try a flawed version of this plan with disastrous results. Faced with the need to reduce payroll and loathe to eliminate jobs, the business owner asked everyone in the company to take a 15 percent pay cut, assuring them that she was taking the same reduction in salary. She hoped they would see this as a good way to help all their coworkers keep their jobs.

It didn’t work that way. Morale plummeted and some of her best talent jumped ship. Months later, when she was able to reinstate full salaries, she didn’t score any points with her staff because the damage was already done.

The crucial elements of cutting payroll while retaining employees are 1) giving them something back, i.e. time, in exchange for giving up some of their salary, and 2) giving them the choice of making that trade or not. Asking employees to help suck up your losses by getting paid less for the same work week is only going to hurt the company in the long run.

The thing about being an entrepreneur is that you have the potential to make a lot of money in good years. You also have the potential to lose money in the bad ones. We all willingly take that risk, but it’s not fair to expect our employees to share in the down side. On the other hand, in 2010 or 2011, when we see year-end projections that show us closing the year with gobs of money, we’ll benefit nicely from the upside of that risk-reward ratio.


Small Business Strategies: Recruiting and retaining talented employees when you can’t pay big salaries

 Millennial in copyroomAs a growing small business, you may want to keep your payroll costs as minimal as possible.  But to build your company, you’re probably going to need employees. Talented employees, experienced employees, people who are excited about working for your company. So how are you supposed to do that, if you can’t offer huge salaries? Fortunately, there are lots of folks out there who are more interested in quality of life than making top dollar. Here are six ways to help recruit and retain them:

1. Offer flexibility: Let people set their own hours to avoid traffic or pick up their kids from school. Offer to let them work from home a few days a week. Give them as many options as you can for tailoring their workweek to the demands of their lives. This can be the trump card for securing top-rate experience, not to mention loyalty to your company. At Tribe, I was able to hire a fantastic agency accountant for a very reasonable salary by letting her work a 30-hour week. That way she and her husband could arrange their schedules so that they didn’t have to put their young son in daycare.

2. Be willing to make life-balance a priority. Younger employees (read: cheap labor) consider balance a birthright. If you fill your ranks with Millennials or Gen Xers, they’ll be expecting ways to balance their work with the rest of their lives. While a Boomer might be happy to grab a sandwich and eat as his or her desk, the younger crowd will be spending lunch at a 90-minute yoga class, or heading over to the kids’ school to read a story to the class. Be proactive about accommodating that, and you’ll stay a few steps ahead of the big corporate employers.

3. Make the office a nice place to be: A pleasant work environment goes a long way towards making employees happy to be there. Improve yours with anything from a weekly bowl of fresh fruit in the kitchen to having a feng shui consultant fine tune everyone’s workspace.

4. Model healthy work relationships: No one likes to work with jerks, so don’t be one. Demonstrate for your people how you deal with disagreement, with failed efforts, with missed communications. And don’t let your employees play you; whenever possible, nip politics in the bud.

5. Be liberal with vacations, holidays and personal days: You already know most people perform better if they get a break once in awhile. The last thing you want is for your star employees to burn out. Give people an extra week of vacation when they hit three years of service. Give everyone their birthday as a freebie day off. Close the office the week between Christmas and New Year’s. Consider summer hours, with an early closing on Fridays from Memorial Day through Labor Day. You won’t believe how much this means to people.

6. Don’t underestimate the little things: Small gestures towards making your employees lives better count for a lot. Invest in decent coffee for the break room. Bring in bagels on Monday morning. Pass around bottles of beer on a Friday afternoon. Let them bring their kids to work once in awhile. Or their dogs.