Thursday, December 22, 2016

How to deal with retrenchment of staff

During a recession, companies have to reduce their workforce. Some companies did it well. Others did it badly and caused financial distress to the retrenched staffs and fear among the remaining staff.

Here is a good approach:
The company offered an attractive package for staffs who are willing to leave the firm. They may lose some of their better staffs, but these are staffs who have to option to work elsewhere or are able to make adjustments. If enough staffs take up this offer, the company has solved its downsizing well and everyone is happy.

If not enough staffs take up the exit package, the company has to adopt the next step. Some companies ask their remaining staff to take a mandatory no-pay leave. It applies to all the remaining staff. If the no-pay leave is one day a week, everyone takes a 20% salary cut and enjoys 20% more free time. This is a fair approach.

Here is a bad approach:
The bad approach is to decide on the staffs to be retrenched. It means that the retrenched staffs have to take a 100% pay cut (although they may enjoy some retrenchment benefit to tide over a certain period). There is uncertainty and fear as to the people who will be selected for retrenchment. Favoritism and politicking come into play.

I hope that companies will adopt the good approach.

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