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Cut Costs with a Four-Day Workweek

Howard Scott |

Is business down? Are expenses piling up and cash reserves low? Is your frustration level off the charts? It may be time to make some tough decisions.
One alternative is to lay off staffers. But another strategy might be more palatable for your operation and anyone in it who’s anxious to keep their job: going to a four-day workweek. Reducing wages and FICA costs 20% might just be what your company needs to get through tough times.
Think about it: Everyone keeps his or her job. Production churns on without interruption. You continue to satisfy your customers with quality product and courteous, on-time delivery. And when business picks up again, you revert to a normal workweek. Here’s how to do it.
Call a meeting. Staffers already know that business is slow. Work is sparse, and the days are dragging. Using charts, show how much volume is down and that profits are disappearing or nonexistent. In plain English, state that the company is losing money every day it opens its doors. This can’t continue, or everyone will be out of work.
There are two choices, you’ll say — lay off staffers or resort to a four-day workweek. Since you think you have a good, hard-working team, you’ve decided on the latter. Announce that the change will go into effect in two weeks.
Explain what this will mean for all staffers. Everyone will work four days a week. Schedules will be based on individual preferences, balanced against production needs. The plant’s production schedule won’t change (five or five-and-a-half days a week), but slots will be allocated to cover the need.
While employees will receive four-fifths of their weekly paychecks, there will be no reduction in benefits — sick days, vacation time and personal days. If the employee chooses to do so, he or she can continue working full-time, using up paid days off.
That is, if the employee has two weeks of paid vacation coming, he can continue to work five days a week for 10 weeks, receive full pay and won’t be penalized, but lose the vacation days. On the 11th week, he will only be able to work four days and receive four days’ pay.
At the same time, you’ll cut management salaries 20%, including your own. Management must share in the burden. Managers will probably work the same amount of hours as they did, although they’re making less, of course, and you will probably work more.
At the announcement meeting, make sure you emphasize the fact that you, too, are making a personal sacrifice. In other words, you’re only doing unto others what you are asking of yourself.
Remind and reassure everyone that this pay and work reduction is temporary. Suggest that with any luck, the company will be able to return to full-time schedules in three to four months. With the policy in effect, cash flow will improve and the company will be much healthier financially. Even if staffers initially use their sick/vacation days as the fifth days of their workweeks, expenses will go down fast. Your personal pay cut will be a big help.
In the weeks before a four-day workweek goes into effect, invite each staffer into your office to talk over his or her situation. Make clear that you understand how difficult the change may be, but emphasize that there is no other choice.
It’s a matter of company survival, you’re making the same sacrifice, and it’s hard — what with a mortgage and two kids in college (or whatever your situation). Remind employees that the policy is temporary.
When you suspect you might lose a staffer and would rather not, help the person figure out a way to cope with the reduction in wages. Maybe he or she could cut your lawn, paint your brother’s house or clean neighbors’ houses. You could link him or her up with a fellow small-business operator who needs a little help. As a last resort, you can offer the person an advance on their wages or salary.
This is a tricky proposition. In my 15 years of business ownership, I loaned only four employees money. Three times, everything worked out fine and I was repaid in full. Unfortunately, I lost money in the fourth situation because I had cosigned on a car loan, and the employee defaulted.
Still, I feel my willingness to back good employees financially was good for retention, and I don’t regret it. Even though it was once a net loss in dollars, it was a net gain in longevity and trust. My people felt I cared.
To let employees know that the sacrifice won’t be long-lived, show each of them a list of marketing initiatives that you’ll pursue to rebuild volume. The list might include calling up former accounts and asking for another try, going after commercial restaurant and hotel accounts, and making phone calls to new residents.
Rather than an endless list, focus on only a few strategies. None of them should involve any additional expense. For example, if you were to embark on a $5,000 promotional campaign, a staffer might think, “He won’t give me my deserved pay, but he’s putting money into some cockamamie scheme. This isn’t where I want to work.”
Instead, the marketing initiatives will be labor-intensive for you and your managers. For instance, if you told them you were going to spend an hour every evening making phone calls from home to win more business, your staffers are liable to be more sympathetic. They’ll be apt to say, “Well, you have to give him one thing — he’s trying.”
In individual meetings, get a feel for employee response. Will the employee quit at the end of the first week of the new schedule or before it begins? Will there be disgruntled employees? If you suspect this, supervise these people closely to make sure they do their jobs. Follow-up meetings with these individuals may be necessary.
If a staffer decides to use up his or her paid days off, make sure you agree on the number. You don’t want a staffer to blow up because he thought he had 15 paid days, and you only have 10 on the books.
Once you begin the four-day workweek, engineer it for maximum efficiency. You might have to move people around frequently. Of course, everyone will have more flexibility built into their schedules, so use that flexibility to your advantage.
Never let customers know that you’re on a reduced work schedule. If the plant makes a mistake, don’t blame the four-day workweek; admit the mistake, take the blame and ask for another try. It’s business as usual.
Hold periodic update meetings with your staff. Report the strategy’s progress. There should be good news — something they can hang their hopes on. After six months, many will be in a tough financial situation. They will be running out of time and patience, and you will begin to lose good people.
You can and will say that the four-day workweek is necessary for survival, but the strategy must be a short-term one. With luck and hard work, you’ll be able to end reduced hours within three or four months.
Resorting to a four-day workweek is a two-pronged attack: You must continually bolster employee morale, and you must win new business to get volume up to normal levels. Time is of the essence.
 

About the author

Howard Scott

H&R Block

Industry Writer, Drycleaning Consultant, and H&R Block Tax Preparer

Howard Scott is a longtime industry writer and drycleaning consultant, and an H&R Block tax preparer specializing in small businesses. He welcomes questions and comments, and can be reached by writing Howard Scott, Dancing Hill, Pembroke, MA 02359.

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