The Headcount Solution : How to Cut Compensation Costs and Keep Your Best People

Although not a panacea, alternative work arrangements should soften the blow of reductions and keep the key people and skills needed to thrive in the future. Remember, it’s important not only to cut costs now, but also to invest in the future. Following is a list of improvements that should be expected:

• Sharp reduction in short-term separation costs. Every job saved will reduce separation costs by an average of about 20 to 25 percent of annual salary.

• Retention of key people. If people with targeted skills and capabilities are chosen, the firm has a better chance to retain the best people and critical skills in an environment of forced reductions and layoffs.

• Higher morale replacing fear and anxiety. The company has a much better chance of rallying the troops in an environment where it outwardly demonstrates the desire to maintain a core cadre of people to succeed in the short and long term.

• Reduction in future hiring and staffing costs. By keeping key people and skills now, future ramp-up costs drop significantly.