Strategies for Cost-Effective Workforce Management in Response to Business Challenges

Hello,

Our team manages the workers at a garment factory in Coimbatore, India. Due to the recession, we are considering temporarily reducing the work week to 5 days instead of 6 days to lessen the burden of wages on the company. Is it possible to do this? Will we need to pay the workers based on a 5-day work week (40 hours) or a 6-day work week (48 hours)? How should we proceed?

Best,
BIC

If you aim at reducing the cost by cutting the one day wages of daily-rated workers, then it is okay. But if you aim at total reduction in the cost of manpower, then you have to do a lot of homework before proceeding further on it. Because the former one will give you direct results, but the quantum of reduction will be very meagre since it is going to reduce only four days' pay, and that also when it is one of the daily-rated people. You can imagine how big it should be. In addition to daily-rated workers, if you want to make the salary of all, including Executives, reduced by 4 days a month, then you have to issue a notice under section 9A of the ID Act before 21 days of implementing the decision and take the staff into confidence.

Normally, cost reduction by reducing salary for the days declared as holidays, even as a measure of cost-cutting, will not be welcomed by the employees. This will create a lot of mismatches in their family budgets, and the result will be total disappointment among the workforce. Therefore, it is practically not possible to get employee concurrence.

By reducing the working days from 6 to 5, you are also getting benefits of saving in electricity costs, vehicle running expenses, and many other costs. You can just aim at such costs and declare a 5-day week. The pay bill of daily-rated employees who are paid on the basis of days worked will automatically get reduced.

Legally speaking, you are not expected to reduce the salary of employees due to any reason, including financial losses or cancellation of orders or accumulation of stock. These are all the headaches of the employer and not the workers. If you keep the workers' pay as per the existing pattern and ask them to work for 5 days so that at least some components of salary like tea allowance, heat allowance, shift allowance, etc., can be saved along with lots of savings on power and fuel, and ask the managers to sacrifice 4 days' pay per month or take LOP for one day a week, then you can see the response. The persons who regularly complain about workers and show PPts in Management Reviews as part of the company and are very positive towards any changes will turn hostile, and they would be the first to object to the move. You can test it NOW.

Regards,

Madhu.T.K

Madhu, thank you for your advice. Our problem is that as a staff, we have one engineer/designer, one HR manager, and one accounting person for a workforce of about 90 workers. So in our case, the admin/office overhead is less compared to having 90 people working six days a week when the company operates only three to five days a week during recessive times.

BIC

In such a scenario, it is advisable to reduce the manpower gradually and then come to an optimum level. Once your situation improves, you can think of adding more. If the workers cooperate, you can make a decision to either lay off an operation where there is no work or retrench the workers. Both are very sensitive and involve a lot of legal complications. The latter one is a permanent solution to reduce manpower costs, though you have to spend a good amount by way of retrenchment costs. Lay off is only a temporary arrangement.

If the workers agree, you can implement a 5-day week or even a 4-day week. Alternatively, you can ask the workers to work for 4/5 days, and 1/2 day will be taken from the PL.

Madhu.T.K

Dear BIC,

I would like to understand how you would reduce wage burden by reducing one working day in a week. What are the premises on which you have evolved this idea?

Regards,
Shailesh Parikh
Vadodara, Gujarat
99 98 97 10 65

Dear Friend.
I endorse the views and suggestions of Mr. Madhu.
Your motive is to reduce overheads of your company temporarily to manage the shortfall in business. You need to reduce your wage bill and also other overheads to manage the present crisis. More over idle sitting of people will create evils in the company.
Please see two options.
1) From your query, it is understood that most of your employees are on daily rated basis. If so one day wage bill for 40-50 people will be considerable. In this case after taking them in to confidence you can plan five days work in a week. Due to this some may quit during this period by looking better one. If these people are trained and skilled in their work –like cutting/garmenting area-. That should be looked into. Even though, you can take this as an opportunity and to manage the shortfall you can shift part of the work of garmenting thru outsourcing. There are plenty of opportunities in Tiruppur like area. Seasonal business can be mana

Hi Madhu and other contributing members,

To save costs, can we run a 5-day workweek with 10 hours of work per day, including a 30-minute break? This schedule would result in a total of fewer than 48 hours worked per week (9.5*5=47.5). If so, what are the legal formalities we need to consider?

The concept of 48 hours a week is designed to suit six-day working. Legally, you can engage workers for 9 hours a day, and the spread over, including hours of rest, can be 10 hours and 30 minutes. But by extending working hours beyond 8 hours and 9 hours, you will not get the required output. Therefore, it is always desirable to fix working hours to 9 hours per day, which will give 45 hours a week. The shortfall has to be ignored or made up by reducing the holidays (if you have been following more than what is provided under your state's Industrial Establishments National and Festival Holidays Act) or permitted leaves.

Madhu.T.K