Cutting Costs Doesn’t Have to Mean Losing People

During these tough economic times, businesses have to do whatever they can to stay afloat, as well as various state and federal governments. Both businesses and governments can try to improve their economic standings by increasing their revenues streams in different ways. A business may increase its marketing efforts by offering promotions or discounts in hopes to increase sales while a government agency may opt to raise taxes or buckle down on issuing traffic citations.

One method they have in common to increase profits is by cutting costs wherever they can. In the State of California, Governor Arnold Schwarzenegger has ordered that almost 200,000 state workers' pay be cut to minimum wage, until the budget can be passed. In 2003, it was ruled by the state's high court that in times of a budget impasse can reduce the salaries of state employees as long as they are paid at least minimum wage.

California's efforts though have been met with some resistance by state Controller John Chiang, who claims the computers used for payroll processing cannot handle that programming task. Chiang released a report saying making the computer system reduce pay while complying with federal labor laws was an "unsolvable puzzle."

Unfortunately for businesses, especially small businesses, the most common way to reduce costs is by cutting payroll, meaning layoffs. While layoffs might free up some capital, it's certainly not the best way to stimulate the economy, especially while some indicators are apprehensively showing a small level of improvement. ADP, who offers small business payroll processing services, added 42,000 jobs in June.

So as a small business, layoffs might seem like a necessity, but there could be other ways to lower costs without letting anyone go. One way is to expand the roles your employees already perform into other areas. If you currently outsource a function consider moving it back in-house, at least until things pick up. Another way is offer other incentives instead of bonuses or overtime pay. It may not go over well, but some employees may part with a little pay up front in exchange for more days off or something the following year.

Don't be afraid to be open with your employees about the current situations and you may find that they are willing to work with you to help the situation. Nobody wants to lose their jobs, especially in this market, so your employees might be open to volunteer furlough days or a temporary decrease in pay, especially if the alternative means downsizing.

So whether you are a business or the government, the poor economy has probably had some negative impact on your revenue streams. Your first instinct may be to cut payroll via layoffs but it's worth taking the time to examine all other options first. Keeping your staff intact not only helps you keep functioning at maximum efficiency, but also has a positive impact on the economy as a whole.

About the Author:
Patrick Kelly is writer based in San Diego, California. He writes extensively for an online resource that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs such at Resource Nation.