In the modern business world, there exists strong competition among enterprises. Sometimes the rivalry leads to severe profit loss, and companies are forced to implement unpleasant and harmful measures such as pay cuts in order not to go bankrupt. While doing so, it is recommended to use the evidence-based management framework to minimize the adverse effects of the measures (Gamble & Jelley, 2014). In this paper, we analyze the case of Aerospace Inc. and offer ways to implement pay cuts so that the harm is minimal.
To implement the pay cuts, we will use two approaches: turn full-time employment into part-time employment, and enact furloughs. The case requires that no layoffs are made. It is also suggested that a pay cut of 15% would be appropriate to compensate for the company’s recent failure. Enacting furloughs involves asking employees to take an unpaid leave for a period of time.
The company’s headquarters are located in Texas; the exact location of the plants is not known. Thus, we suppose that the employment laws of Texas apply (though additional research might be needed). Texas’ laws leave it up to enterprises to formulate the definition of the full-time and part-time status of employees (Texas Workforce Commission, n.d.). Additional research is required to determine this definition in this particular company, but let us suppose that Aerospace Inc. defines full-time employment as the 40-hour work week. Employees in the firm earn hourly wages. Therefore, the 15% cut means that full-time employees start working part-time, 34 hours per week. Part-time employees have their working week shortened proportionally to their current working week. Thus, each worker has their number of working hours (and, accordingly, salary) decreased by the same percentage, which should be perceived as fair by the employees; such perception is important for retaining employee motivation (Allen, Bryant, & Vardaman, 2010). It is also vital not to forget about the paid vacations which were earned while the employees worked full-time.
Importantly, additional research should be conducted to find out whether a company will suffer much if it starts working four days a week instead of five. If the losses are not significant, the employees should be offered the option of working 8.5 hours daily, but four days a week, having more days off, instead of working five days a week, e.g. 7 hours during the first four days and 6 hours on Friday.
Furloughs will be enacted by asking each of the workers to take an unpaid leave for a number of weeks (in addition to the paid vacation); they will have to rotate while doing so. We would recommend leaving workers an option of choosing whether they wish to take all the three weeks one after the other, or they would like to distribute those weeks throughout a year. This would allow employees who need money much to “soften” the effect of the unpaid leave by distributing it in a way that allows them to organize their spending, while also leaving the option to take a long rest to those who would prefer it.
The employees should be informed about the decision on a factory collective’s meeting. The management should apologize for the measure. It should be explained that the company has suffered a major loss, which is why the salary cut is inevitable if the company is to survive and not make compulsory redundancies. It ought to be stated that the firm wants to treat every worker equally, which is why everyone will have their working hours decreased by 15%. The employees should be offered to work 8.5 hours each day, but for four days a week, so that they have more days off and lower travel expenses. It might be left for them to decide which option to choose; in this case, the question should be put to the vote, and the counting commission should be made from randomly chosen workers, so that it is seen everything is fair.
As for enacting furloughs, the necessity of this should also be explained. The employees should be given an option of choosing the form of unpaid leaves (whether to take three weeks one after the other, or distribute them), and they ought to be told that the company decided to let them choose so that it is convenient to them, but they should be asked to be cooperative and help the management make the schedule consistent, so that they take their leaves in turn. An HR manager should then work with employees and make a schedule of unpaid leaves that would still allow the workers to rotate. Of course, the employees should be given some time (e.g., a week) to consider when they wish to take their leave.
Some employees might be frustrated and start committing thefts. This will be recorded by keeping records of inventory shrinkage. Should the shrinkage become substantial, measures ought to be taken. It is possible to tell workers that if the shrinkage exceeds some threshold, the company might be forced to introduce further cuts.
To sum up, the pay cuts should be implemented in a way which would compensate the loss that workers suffer by additional convenience to them. The contractions should be implemented fairly. The employees should also be allowed to choose options preferable to them where possible.
Allen, D. G., Bryant, P. C., & Vardaman, J. M. (2010). Retaining talent: Replacing misconceptions with evidence-based strategies. The Academy of Management Journal, 24(2), 48-64.
Gamble, E. N., & Jelley, R. B. (2014). The case for competition: Learning about evidence-based management through case competition. Academy of Management Learning & Education, 13(3), 433-445. Web.
Texas Workforce Commission. (n.d.). Part-time / full-time status. Web.