You are on page 1of 7

REDUCING LABOUR COST WITHOUT RETRENCHMENT

HARISH.N 5TH SEM I SEC. 9900576776

INTRODUCTION
An employee is said to be "retrenched" when his or her job becomes redundant and the employer either cannot offer the employee any alternative position or, any alternative position offered by the employer cannot be accepted by the employee. Retrenchment can be done in two ways: One way is to slash expenditures by laying off employees, closing superfluous offices or branches, reducing benefits such as medical coverage or retirement plans, freezing hiring or salaries, or even cutting salaries.

The second way in which a company may practice retrenchment is to downsize in one market that is proving unprofitable and build up the company in a more profitable market.

ALTERNATIVE METHOD TO CUT COST


FREEZE/CUT SALARY SENSIBLY: It is the first step taken during crunch situation. Companies prefer to cut salaries, delay and eliminate bonuses.
RAISE EMPLOYEES CONTRIBUTION IN BENEFIT PLANS This policy will result in dual benefits. Employer cost on benefit will come down and employees will also own up the benefits and ensure appropriate utilization. REDUCTION OF WORKING HOURS: Reduction in working hours and corresponding reduction in pay must be preferred over retrenchment

ALTERNATIVE METHOD TO CUT COST


CUTTING DOWN ON TEMPORARY STAFF: Large amount of money can be saved by cutting down temporary staff, even though they provide flexibility it is still not an economic way of getting job done REDUCE SPENDING ON TRAINING TRAVEL: Alternative and economical ways of organizing training like in-house training must be preferred over external consultant.
RESTRICTING OVERTIME: It reduces immediate cost saving to organization. Introducing flexi-hours ,working from home facilities helps companies on getting away from over payments

RETRENCHMENT AFTER-EFFECTS
The after-affect of retrenchment is always dangerous because: It may leave organization flat-footed when things are better off, as sometimes things are better off It could further escalate costs as employees are to be compensated with severance packages. It results in sudden shortage of staff, loss of institutional memory It lowers loyalty amongst existing employees.

CONCLUSION
Although retrenchment is inevitable under some circumstances companies must resort to it only under dire conditions. Companies must take a softer approach and must look to review spending to curtail costs in certain areas It must also encourage employees to come up with innovative ideas in all departments. Management should involve employees in adjusting operations to improve efficiency.

THANK YOU

You might also like