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INSIGHT
Many Arkansans have appiled for unemployment benefits, according to statistics supplied by the Employment Securities Department. While a company may quickly recognize its need to cut costs during an economic downturn, human resources professionals say there are many ways companies can save money before resorting to layoffs, which can be counterproductive when sales return to normal levels. Last month, the National Federation of Independent Business suggested five cost-cutting alternatives to be considered before layoffs: * Establish a hiring freeze; * Relocate employees to other departments; * Cut administrative salaries before employee salary cuts; * Consider shortening the work week; end * Offer early retirement to employees nearing retirement age. Kim Hester, assistant professor of management and marketing at Arkansas State University in Jonesboro, said she often hears of companies using these alternative methods. Other savings can come from cutting benefits, especially health insurance, by raising the co- payments, deductibles and out-of pocket maximums that employees have to pay, Hester said. Reducing the work force is generally the last, most drastic step a company will take to keep its head above water. Acxiom Corp. of Little Rock is one such company. Executives began assessing the declining sales situation in January, and in April they had announced across-the-board pay cuts. By June, layoffs were inevitable. The decision was not an easy one, said Jeff Standridge, organizational development leader at Acxiom. Executives attempted to balance the company's needs with the employees' needs. Employees' pay was reduced by 5 percent in April, and associates were offered stock options in return for additional, voluntary pay cuts, up to an additional 15 percent. Acxiom also cut other payroll, travel, marketing and benefit expenses in order to save a projected $20 million-$30 million. Standridge said the company eventually met its goal, but not without a lot of sacrifice. Employees earning less than $25,000 and non-U.S. employees were exempt from the mandatory pay cuts but could voluntarily exchange pay for stock options. More than a third of the company's employees took the extra pay cuts, according to a company statement. Charles D. Morgan, Acxiom company leader, said in the news release that employees responded positively to the program. "Cut my pay, and give me a stake in the company's future that is the ultimate vote of confidence from the very people who best know this company, its customers and its products," he said. But despite the preventative measures, it was only two months later that Acxiom laid off 7 percent, or 412 of its 5,845member worldwide work force. More than 250 of these positions belonged to Arkansans, Allison Melson, Acxiom spokeswoman, said last week. "Even though we ended up having a work force reduction, the size and magnitude of that reduction was considerably less than what it would have been had we not taken the initial steps of payroll reduction program [and] the expense cuts Standridge said. American Transportation Corp. in Conway laid off more than 400 workers in September because demand for manufactured school buses had slowed significantly, company spokesman Roy Wiley said from his Chicago office. Before the layoff, which was announced in late August, AmTran often reduced the work week from five days to four and even took a "down week" while production was put on hold, during which employees were not paid. Layoffs were conducted by department and according to function, Wiley said. Within a department, the person with the least amount of time at the plant was cut first. Production of school buses generally
slows in the fall, Wiley said, and the weak economy also is to blame for
the layoffs. A weak economy means lagging tax collections, and that means
school districts often make do with older buses, he said. Wiley said he hopes to rehire many of the laid-off employees next spring if the economy perks up, but he hesitated to guess what the future holds. Despite several high-profile layoffs, most small businesses in Arkansas have not suffered that fate. Hugh Havens, unemployment insurance administrator for the state Employment Security Department, said most small businesses rely on other cost-cutting measures to keep them afloat. In most cases, businesses choose to reduce employee benefits and work hours and implement a hiring freeze. Smaller businesses are also less likely to hire in the first place, which makes layoffs impractical, according to Bruce Phillips, a senior economist with the NFIB in Washington, D.C. "Small businesses don't hire as much and will cut back on hiring to save money," he said. "It's easier to leave jobs unfilled than to lay people off." Another indication of the tightening economy is the less generous severance packages being offered when layoffs do become necessary, Hester, the ASU professor, said. "Companies that downsized [earlier] tried to help the sting by offering certain benefits to laid-off employees, such as severance pay for several weeks, health care coverage for a similar period of time, resume and job-hunting services," she said. "However, during the last few major layoffs [in Jonesboro], we are seeing much less lucrative or sometimes no types of assistance to displaced workers." Source: Copyright Arkansas Business
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