How Companies Can Cut Costs and Expenses During a Recession

When we are faced with recessionary times businesses will try to cut their expenses any way they can. The fastest way to cut expenses is by laying off people. Not only do you get rid of their salary but they health benefit expense normally goes away as well. Once laid off you are able to maintain your health insurance through COBRA but the average person cannot afford to pay the premiums so they are left without any type of coverage. The new stimulus package does have some stipulations whereby 65% of the premiums would be paid for the average worker.

Companies understand the tremendous burden they place on families when there are massive lay offs. They also understand that employees are their most valued assets. Taking those things into effect some companies will look for other ways to cut expenses without having to lay employees off.

Eliminate 401k contributions

Some companies will suspend their 401k contributions in order to save money. If you have a 401k you know that some companies will match your contribution up to a certain percentage. Or they will match 50% of your contribution up to say 3% or 4%. If they cut out their percentage over time they can save a significant amount of money.

Raises

Other ways to save money is to cut out all salary increases across the board. When you add up all of the salaries within a company and add on 3% to 4% to every salary you can save millions of dollars, depending on the size of your company. It is better to not receive a raise than not to have a job. Everyone would prefer their raise but given the alternative I think employees will be able to live with no salary increase.

Reduce salary

Cutting salaries is another way organizations are looking to cut costs and expenses. This turns out to be another significant saver.

Increase employee's contribution to health care

A number of companies are looking at the possibility of increasing the portion of health care that employees have to contribute towards the premium. If this becomes too expensive employees may want to look for sources of health insurance outside of the company if they can find them cheaper.

Unpaid leave

Employees are being asked to take unpaid leaves. Of course the company can save a substantial amount of money. One company that shuts down during the end of the year for a couple weeks actually extended that time for two to three months and of course the employees were not paid during this extended time frame.

Cut bonuses

And of course companies are not giving out bonuses, (some still are), if the company is struggling due to the economy.

Reduce hours

Cutting back on hours is another way to cut expenses. A lot of companies are experimenting with four day work weeks in an effort to cut expenses. If someone is only working 30 hours per week as opposed to 40 or 45 then this can be a tremendous saving for a company.