Reducing Personnel Costs – Without Layoffs

Let’s start with a classic method to reduce personnel costs: reducing overtime along with a temporary business closure. If your employees have accumulated extra working hours over the course of the year, a period of reduced workload is an ideal time to offset these hours and convert them into compensatory time off. At the same time, temporarily closing the company is advisable in order to save operational costs. However, one thing to keep in mind: depending on the contract, employees may be entitled to compensation for their overtime. You should therefore check this beforehand.

Even without reducing overtime, a temporary company closure is a good way to reduce personnel costs. Your staff foregoes wages and salaries during this time but can return to their workplace under the existing conditions after the company holidays. Particularly important here: transparent and early communication.

Reduce Personnel Costs through Short-Time Work and Outsourcing

Flexible working hours are a good option for adjusting workforce levels during peak periods or times of reduced demand. Under certain conditions, you as an employer can also apply for short-time work – a portion of the wage is then covered by the state.

Short-time work is indeed an effective tool to prevent financial disaster for a company. However, the negative effect should not be underestimated. Studies show that employee motivation and sense of belonging to the company suffer significantly during periods of short-time work.

Clearly, outsourcing is also an alternative to save money.

Reducing Benefits and Salaries

In times of crisis, you might ask yourself: are you offering your employees voluntary benefits such as a travel pass or a gym membership? This is where you can reduce personnel costs.

It is essential that employees are transparently informed about how serious the situation is. To ensure that your employer branding does not suffer due to such decisions, communication around the cuts is extremely important. This is the only way to gain understanding. If possible, make sure that the elimination of voluntary perks does not impact workplace culture or employee motivation too much. Perhaps you can identify a benefit that is not widely used or appreciated?

Another alternative: your employees voluntarily agree to forgo part of their salary for a certain period in order to secure their jobs in the long term. This option is rare and requires a strong identification with the company and a high level of solidarity with you as an employer. If such a measure is considered, management and leadership must lead by example.

Reducing Personnel Costs: The Last Resort

If you have already implemented all previous measures to reduce your personnel costs but need to take another step, the last resort before dismissals is the amendment notice. However, salaries can only be reduced with the consent of your employees. In most cases, this solution is not feasible without complications or disagreements. A serious reason must be present, such as impending layoffs or even company closure. Again, transparent and empathetic communication is key. This way, you ensure that your employees understand the steps taken and work together with perseverance and confidence to steer your company back on track.