Top 5 Alternatives to Layoffs for Canadian Companies

Should layoffs be the primary cost-saving strategy for companies going through financial difficulties? If you’re an HR professional, you’re aware of the traumatic nature of those workforce reduction events, so you know any organization should consider alternatives to layoffs.

In this article, we’ll dwell on the five most common alternatives to layoffs available for Canadian organizations of any type and size. Whether permanent or temporary, those approaches should allow most businesses to recover and get the financial and business results they’re aiming for.

Why should you seek alternatives to layoffs?

Layoffs can be highly stressful not only for the impacted employees but also for HR professionals and the surviving staff. Moreover, a layoff can damage a company’s reputation, potentially sending off the message that they’re in financial trouble and don’t care about their employees. So, when an organization seeks alternatives to layoffs, it wants to mitigate those negative repercussions by resorting to less traumatic experiences for everyone involved.

What are the main alternatives to layoffs?

If your company needs to cut down costs but doesn’t want to go through a workforce reduction event, there are some alternatives to layoffs you might want to consider. The five main ones available to Canadian organizations are work-sharing agreements, reductions in pay, administrative expense cuts, hiring freezes, and attrition. Let’s see them in more detail.

Work-sharing agreements

A work-sharing agreement is a three-party deal involving employers, employees, and the Canadian government, in which workers agree to a temporary work week reduction in exchange for governmental income support. This program is available to companies that are going through a decrease in their normal business activity but want to avoid a layoff.

Work-sharing agreements must have a minimum duration of 6 weeks and can last up to 26 weeks, extendable for 12 more. To participate, employees must experience a minimum 10% reduction in their weekly earnings and be eligible for unemployment benefits.

Through work-sharing agreements, companies can avoid the stress of reducing their workforce due to business difficulties or an economic downturn – as long as the situation is beyond their control. By retaining their staff, they’ll be sparing people the potentially traumatic experience of being laid off, while showing respect and valuing their contribution as employees.

Reductions in pay

No federal law in Canada prohibits companies from unilaterally reducing their employees’ pay. Similarly, provincial regulations allow businesses to perform salary cuts – at least on a minor scale – without employee consent.

Does it mean your company should consider a reduction in pay as a strategy to avoid a layoff? It’s complicated. The repercussions of a unilateral salary cut, even if minimal, can be disastrous in terms of reputation and morale across the board. On the other hand, you could try to firm a temporary salary cut agreement with your employees. However, you must assess if your company is ready to face the stress and friction such a negotiation would generate.

Finally, a pay reduction at the executive level is an option available for bigger organizations. This effort can bring effective results with measures like cutting down bonuses and benefits available to upper management. However, you must communicate clearly and transparently about this idea and consider actions like adjusting compensation levels based on seniority or salary. For example, the higher up in the pyramid, the larger the pay cut.

Administrative expense cuts

Administrative expenses are the costs associated with a company’s operations that aren’t tied directly to its core business activities. Some examples of administrative expenses are:

• Office rent and utilities (electricity, water, internet)
• Office supplies, software, and IT services
• Insurance premiums
• Legal and professional fees
• Perks and benefits for executives

These expenses typically cover the overheads necessary to keep a business running, which means they can’t be avoided or eliminated. However, they’re flexible and can be cut down when budget cuts are needed, making them an efficient alternative to layoffs.

Streamlining operations, renegotiating contracts, adopting automation technologies, or even shifting to remote work to reduce office space are common measures that can lower costs and help to preserve jobs while maintaining the organization’s operational efficiency.

Hiring freezes

Hiring freezes are one of the most sought-after alternative methods for managing workforce costs while preserving jobs and minimizing the negative impacts associated with layoffs. When a company implements a hiring freeze, it temporarily suspends recruitment and hiring of new employees, opting for not filling vacant positions or opening new ones.

Through a hiring freeze, your organization can avoid the financial and reputational costs of layoffs, control labour costs, and reduce the need for dismissals in the event of business uncertainty or an economic downturn. By preserving the existing workforce, your company can stay afloat and avoid negative impacts on morale and overall productivity.

However, you must be aware of the potential long-term consequences of hiring freezes. If you spend too much time without filling critical roles, your company might experience operational efficiency issues and have trouble meeting its goals. So, make sure you assess your staffing needs periodically and prioritize essential positions to support business operations.

Attrition

Just as with hiring freezes, attrition is another common alternative to layoffs that preserves jobs and the company’s reputation. Attrition is the natural workforce reduction caused by employees leaving the company due to retirement, voluntary resignations, or involuntary terminations. 

When companies manage their workforce size through attrition, they don’t replace departing employees and can adjust their staffing levels more gradually without resorting to drastic measures such as layoffs. With this approach, organizations minimize the negative impact of workforce reductions on employee morale while maintaining organizational stability.

The downside of attrition is that, sometimes, not replacing departing employees can run contrary to the company’s more immediate staffing and operational needs, hurting productivity. Also, attrition demands patience from HR and management since it can take longer to achieve the desired outcomes than other methods like layoffs or hiring freezes. So, leveraging attrition as an alternative to layoffs demands careful consideration from HR professionals.

Alternatives to layoffs: main takeaways

Layoffs are challenging for HR professionals and can negatively impact employees and the company. That’s why organizations seek alternative strategies to achieve their financial goals without going through layoffs. Those efforts, however, require careful planning and ongoing evaluation to align with the company’s goals and objectives effectively.

Unfortunately, layoffs are sometimes unavoidable. In those cases, offering outplacement services benefits everyone. While your departing staff can find new work faster than if they went for it alone, internally, you’ll ease tensions, improve morale, boost your company’s reputation, show you have a people-first corporate culture, and reduce the risk of lawsuits.If your organization is looking for support with a workforce reduction event, whether or not you’re resorting to the alternatives to layoffs listed in this article, we at Careerminds are here to help. Contact our experts and learn more about how we can support your company.

Rafael Spuldar

Rafael is a content writer, editor, and strategist with over 20 years of experience working with digital media, marketing agencies, and Tech companies. He started his career as a journalist: his past jobs included some of the world's most renowned media organizations, such as the BBC and Thomson Reuters. After shifting into content marketing, he specialized in B2B content, mainly in the Tech and SaaS industries. In this field, Rafael could leverage his previously acquired skills (as an interviewer, fact-checker, and copy editor) to create compelling, valuable, and performing content pieces for various companies. Rafael is into cinema, music, literature, food, wine, and sports (mainly soccer, tennis, and NBA).