Employers' Choice: Cut Hours Or Cut Positions
In February, Athol tool manufacturer L.S. Starrett dropped the weekly work hours of employees at its local manufacturing site from 40 to 32.
In late March, it reduced them again, to 20.
The move was obviously yet another sign of just how bad the economy is, but it could also be a model for other employers faced with tough decisions.
Backed Into A Corner
Joel Shaughnessy, the personnel director of L.S. Starrett, said the company had no choice but to do something dramatic after sales levels dropped drastically. And it didn’t avoid layoffs entirely, cutting its workforce by a bit more than 5 percent at the same time as reducing hours.
But Shaughnessy said there was good reason to look at options beyond layoffs.
“It preserves jobs, keeps your workforce intact so when [business] does come back you can just ramp up hours,” he said.
As soon as the company made the move, Shaughnessy said, he got several calls from other local manufacturers looking for advice on how to do the same thing.
Jack Healy, director of operations at the Worcester-based Massachusetts Manu-facturing Extension Partnership, said it’s no surprise that manufacturers are looking for any option they can find. He said many of the companies he works with have seen their orders fall 40 to 60 percent.
“Everybody’s in the same boat,” he said. “We had avoided it up until December. Come December the lights went out, that’s our feeling.”
Healy said cutting workers’ hours is not a new strategy for manufacturers.
Although the current downturn is particularly severe, he said, the industry is used to going through cycles, and many employers see keeping trained, knowledgeable workers as an important priority.
Workers whose hours are cut can receive partial unemployment benefits through the state’s work-share program, which has grown remarkably over the past year.
In mid-March 2008, 372 workers were actively participating in the program, according to the Executive Office of Labor and Workforce Development. A year later, the number was 3,873.
The option isn’t cheap for employers though — Starrett, for example, is continuing to provide benefits for the employees whose hours have been reduced. Healy said that typically comes out to 30 percent of employees’ salaries.
Healy said there can be logistical difficulties with reducing hours, and it can be hard for both companies and workers to adjust. But he said Starrett is known as a community-minded company, and it seems to be working hard to do what’s best for its employees.
“I wish more people made that decision,” he said.
But can employers outside the manufacturing world learn anything from Starrett?
Richard Kennedy, executive director of the Worcester Regional Chamber of Commerce, said there are some parallels between manufactures and other employers. Companies that build a product clearly need to keep experienced workers who know how to run the machines and keep production flowing.
Hour By Hour
But retailers and banks have just as great a need to keep the people who have personal relationships with customers.
“If there are people who are recognized as the salesperson they always go to, I think you want to keep that intact as much as you can,” he said.
Alternatives to layoffs aren’t unknown outside the manufacturing world.
The New York Times Co. recently cut the pay of some workers, including some at the Worcester Telegram & Gazette, in exchange for extra days off. That’s essentially another way of cutting hours, although the reduction was much less extreme than that at Starrett. Still, for the most part, the use of reduced hours is an area where manufactures are clearly the experts.
Maybe, before long, companies in other industries will be calling on Starrett for advice.
Got news for our Labor Pool column? Contact WBJ Staff Writer Livia Gershon at lgershon@wbjournal.com.
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