On the Front Lines
We often hear stories about market trends, sociological studies, or government programs aimed at addressing the current workplace and how it deals with work/life balance issues. However, I found it quite interesting to get a glimpse recently at how individuals are making an impact in this arena. A fellow ESP parent shared with me the following e-mail exchange with her CEO.
Employee: I wanted to plant this seed of an idea: if we ever get to the point of having to do layoffs, what about reducing peoples' hours instead? I know that we are actually doing quite well these days, and that our business is relatively strong. I'm really glad about that! However, if things change, and we find ourselves having to consider letting people go, there is another option: we could reduce peoples' work hours instead. For example, if you have 4 people, you could lay one off. Or, you could reduce them all to 30 hrs/wk.
As you know, I have worked here 30 hrs/wk for almost 9 years, and it has worked out quite well, both for the company and for my personal life as a parent. We have so many new parents here now, and some might actually rather reduce their work hours and therefore spend more time with their new kids. So instead of creating a huge problem for one person by laying them off, you could possibly improve the quality of life for 4 employees instead.
CEO: Thanks for taking the time to share your thoughts. I appreciate your sentiment even though I disagree with it.
Let's take your example involving four people. Say we need to cut expenses by 25%. From a cost perspective, it is significantly less expensive for the company to employ three people working full-time than four people working 30 hours/week. There are certain fixed, overhead costs associated with each separate employee. Each employee receives their own health/dental benefits, retirement benefits, and tax withholdings. Each employee needs a computer, a phone, numerous accounts, IT support, etc. Each employee has individual needs and issues.
More importantly, it is unlikely that all four employees will agree to reduce their hours to 30 per week. A more likely scenario is that the strongest of the group will leave to join a stronger company.
We decided to offer you employment at 30 hours/week because you are a unique individual with uncommon skills (plus we and your co-workers like you a lot). If all employees were interchangeable, then it would make much more economic sense for us to employ someone who could work 40 or more hours/week.
I hope my response isn't too harsh, and I don't want to discourage you from making suggestions regarding HR or any other matters in the future.
Marc: Nobody asked for my opinion but I can't resist...
This was one of the more reasonable responses from an HR perspective that I have read. He makes some excellent points but as he says, "I have to disagree" with others.
First, I fully expect that reduced hours employees should receive similarly reduced benefits. Each person's hourly cost including salary, health and dental, retirement, and tax withholdings can all be reduced by the same percentage as the reduction in hours. Yes, it's true that many companies don't have the systems in place to do this but I think that is a weak excuse.
His fixed costs argument is a good one, although I don't believe it is a significant factor in the decision. In this example, phones and computers probably already exist but spares need to be available for more employees, granted. As far as other ancillary costs, IT support, HR accounts, etc. I expect we are talking about minimal dollars. In fact, I expect that employee retention benefits along with reduced salary over time due to the great schedule offerings may easily offset these ancillary costs and may even dwarf them.
Of course, much of this hinges on whether or not the employees want it. I agree with him that reducing employees hours and pay when the employees are trying to maximize their income may cause the best performers to look elsewhere. However, if the best employees want reduced/flexible arrangements, companies should capitalize on this fact and utilize a more diverse compensation package. I have spoken with numerous people who are happy to take a reduction in their maximum market value in exchange for an optimized life.
One point he didn't make that would support his argument is that when reductions in workforce are necessary it is a prime time to eliminate under-performers. In the example, it presumes that all four employees are equally valued whereas that is often not the case. Getting rid of a chronic problem worker has tremendous value on a variety of fronts. With that said, a company that is able to retain a stable of flexible, loyal, and qualified employees at any level of hours paid is in a position to utilize the brainpower of these individuals which is far more valuable than mere time on the clock.
Also, if any of these suggestions have any value to a company they can take advantage of a little-known unemployment law in Massachusetts . In the example of 4 employees below, reducing each to 30 hours in lieu of layoffs, allows the employees to claim prorated unemployment benefits which I expect will greatly reduce the likelihood that the best employees will leave for more money. This option nets a rather small reduction in salary for employees for many months, increases their time for the rest of their life, possibly reduces their childcare costs, creates energized employees willing to go the extra yard for the company (possibly producing full time work at reduced hour pay), and can allow a company to utilize the pool of money they have been contributing towards unemployment for years to meet a portion of their payroll expenses.
I realize that I'm painting a rosy picture but I truly believe that companies have not fully appreciated the power they wield when it comes to compensating employees. They have evolved in many instances to a one bullet revolver. However, if they ignore what essentially all sociological studies of the younger generations conclude, namely, that equal relationships and balanced lives are desired, companies will continue to have to pay higher salaries for certain skills if that's the primary benefit they offer.
Especially now, before a more diversified compensation package becomes commonplace, companies have the opportunity to differentiate themselves in the marketplace to attract and retain the necessary employees to drive their business.
I hope, and fully expect, that these quiet discussions are taking place in an ever-increasing number of instances across the land.
posted by Marc @ 8:16 PM
4 Comments:
I agree that it's a good discussion to have. But I have to agree with the CEO that there aren't going to be enough people who would be happy about taking the pay cut. My wife and I are both big believers in ESP and it would really hurt if either of us lost 25% of our salaries, as much as we'd like the reduced hours.
And reducing benefits proportionally is only going to hurt employees more. Health insurance premiums are a fixed cost. My employer pays 100% of my premiums (I know how lucky I am, believe me) so if they cut that back to 75% to go along with the cutback in salary, I would have to pay the other 25% out of my own pocket. So that's an additional cost to me, which is the same as an extra pay cut. Or if I could got to a plan that costs 25% less with reduced benefits, then I'd be paying more of my health care costs out of pocket, which again, is equivalent to a pay cut.
Also, I think your comment about the proraated unemployment "This option nets a rather small reduction in salary for employees for many months" is way off. I've received unemployment and I got about 25%-30% of my salary. Maybe the benefits are better in Mass. than here in Colorado, but getting a 25% portion of unemployment benefits is hardly anything. And even if it was a significant amount, it runs out after 9 months or whatever it is, so then what do you do when everyone has to take another pay cut?
The CEO's second to last paragraph summed it up. If you want to work reduced hours, you need to demonstrate how it will benefit the company. And simply saying "I'll be happier and less likely to leave" isn't going to cut it with most employers.
Again, I think it's great to have the discussion and companies should look at offering more part-time options. But it puts a higher premium on finding the right fit between employer and employee, you can't just impose it across the board.
Well said Dennis. Of course, it comes down to what the employees want and the businesses need. The research states that younger employees want more balanced lives. And employers need qualified workers to get things done. I just think it's short-sighted for businesses to not utilize a more well-rounded arsenal of benefits.
All other factors being equal, working less usually means lower incomes. For many ESP parents it comes down to maximizing their rate of pay so that the hours/schedule can fluctuate and still make ends meet. Until companies begin to recognize the fallacy of the almighty 40-hour work week, they will continue to struggle to retain the best and brightest young workers.
Also, you don't mention the corresponding childcare savings and the wealth of other non-monetary benefits of a work-to-live lifestyle. Even if the math dictates that reduced hours working will cost the family money, it's nice to know the number. How much would it cost for a life we may indeed love?
How would folks react if companies were allowed to mandate a 50 hour workweek with a corresponding 25% increase in pay? The answer may say a lot about what they value more, money or time...
Marc, you bring up a good point about child care savings, although it's not that simple. For infants and toddlers, it can be very difficult to find part-time care. When we were looking for daycare centers before our son was born, there weren't any that offered part-time options for infants. Most didn't offer part-time until they were 1 or 2 years old.
And then when they are in school, your childcare costs are low, so there isn't that much to save. Paying for 3 days of after school care instead of 5 would save us about $100 a month, which isn't a whole lot. And then trying to find something part-time in the summers would be almost impossible. Pretty much every camp or summer program we've looked into are only full-time.
Again, I do agree that employers should look at offering more options, although we have to be realistic that not every job lends itself to that. Ultimately I think we will see a shift in thinking, but I don't think it's going to be as dramatic as you seem to.
Dennis, there are certainly barriers to pursuing an ESP life. The working world, for one, still often seeks the "ideal" worker who is presumed to have someone taking care of the home front. I am optimistic that will change, not out of the generosity of employer's hearts but out of necessity.
The younger generations are committed to creating the balanced life they idealize and some percentage will be willing to tackle the barriers to get there. In addition, older workers will be retiring in record numbers in the next couple of decades. Many of them will be lured back into part-time positions to fill the vacancies.
Many ESP couples talk of exactly the kinds of things you mention. In our family, the summer schedule is a big puzzle trying to piece together part-time care for our kids. It would be much easier to have one parent stay home or sign the kids up for full-time camps but that comes with other sacrifices we are unwilling to make.
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