How Employers Are Controlling Costs During the Recession

Sep 14, 2009

By Lexer Quamie

While soaring unemployment rates are dominating the headlines, many employers are taking a range of actions to control costs.  A recent Families and Work Institute (FWI) report, "The Impact of the Recession on Employers", offers some insight into how these cost-cutting measures are affecting job quality.

Cost Cutting

Based on a representative sample of employers, the report finds that among the two-thirds of employers that have seen their revenues decline, 90 percent have turned to cost-cutting measures.  Men have been disproportionately affected. They are more likely than women to work for employers that have laid-off employees, reduced working hours, and reduced salaries.  In addition, employers with more men on the payroll rely more heavily on compressed workweeks (27 percent versus 15 percent) to control costs and are less likely to help laid-off and other workers link to benefits or services (40 percent versus 51 percent) for which they might eligible.   Other cost-cutting measures include reduced hours that are "voluntary" (29 percent) and involuntary (28 percent) as well as reductions in sick time (8 percent) and paid vacation (7 percent).

In comparing firms where most workers are hourly with firms where most workers are salaried, the survey found two cost-controls that reached a statistically significant difference.  In the hourly worker firms, employers are more likely to:  

  • Reduce health care coverage/increase co-pays
  • See increases in "voluntary" hours reduction

Flexible Work Arrangements

While some have suggested that flexible work arrangements might be a casualty of the recession, overall, the vast majority of the surveyed employers report that during the recession to date, flexible work options have been maintained (81 percent) or increased (13 percent).  Indeed, more than one in four employers (26 percent) report relying on flexible workplace options to minimize the need to lay off employees.

Work Sharing

One way some employers can avoid laying off workersduring this tough economic time is to participate in work sharing, a federal-state unemployment insurance program that allows employers to reduce employees' hours instead of their work force. Employees at firms that participate in work sharing are eligible for partial unemployment benefits. Currently, though, only 17 states have work sharing and even in those states, it is under used. Earlier this year, CLASP released "Work Sharing-an Alternative to Layoffs for Tough Times" which describes how states can establish work sharing programs through Unemployment Insurance.


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