Alternatives to Termination

When companies need to reduce staff, many immediately think of redundancies. However, there are a number of ways to lower personnel costs or reduce overcapacity without unilaterally terminating employment relationships.

Especially during restructuring, it's worthwhile to examine these alternatives early on. Not every measure works equally quickly, not every measure saves costs in the long run, and not every measure has the same impact on motivation, corporate culture, and employer brand.

The crucial question is therefore not: Which measure is the best? But rather: Which combination suits the economic situation and the future organization?

Job cuts should not be judged solely on cost.

Many restructuring projects initially focus on two factors: How quickly do savings need to be achieved and how high should they be?

Both are important. At the same time, companies should consider a third perspective: the impact on the organization itself.

Job cuts can damage trust, prompt high performers to leave voluntarily, and negatively impact the motivation of the remaining workforce. Such effects are often only mentioned peripherally in traditional business cases, but can lead to significant long-term costs.

Therefore, when selecting suitable instruments, companies should ask three questions:

How quickly will the measure take effect? How cost-effective is it? And how much of a burden will it place on employees, culture, and employer brand?

Hiring freeze and natural attrition

A hiring freeze is one of the simplest ways to gradually reduce the number of employees. Vacant positions are either not filled or only filled in particularly critical areas.

The major advantage lies in its social compatibility: direct separations can initially be avoided. However, the instrument works relatively slowly and is only controllable to a limited extent.

Natural attrition doesn't automatically occur where job cuts are actually planned. In the worst-case scenario, key specialists leave the company, while overcapacity persists in other areas.

Short-time work: useful in case of temporary bottlenecks

If capacity utilization only declines temporarily, short-time work can be a suitable solution. Working hours and personnel costs are reduced, while employment relationships are generally maintained. This works particularly well if companies expect the economic situation to improve again.

However, short-time work does not solve the underlying problem of a persistent structural surplus of personnel. Furthermore, if it is used over a long period, employee motivation can suffer.

Internal transfer and qualification

Restructuring becomes particularly interesting when certain positions are eliminated, but new skills are needed elsewhere. In such cases , internal transfers, reskilling, and further training can be a genuine alternative to layoffs. Instead of losing employees and then searching for new specialists, companies can examine which employees can be prepared for new tasks with a reasonable amount of training.

This initially costs time and money. In the long term, however, it can be economically advantageous because valuable company knowledge is retained and employees gain future prospects within the company.

Sabbaticals and unpaid leave

Voluntary sabbaticals or unpaid leave can help to temporarily reduce personnel costs. Such models can be attractive to employees who already desire an extended break. For companies, they offer additional flexibility.

However, they are usually insufficient as the sole solution for a major structural reduction in staff. They are more suitable as a supplementary instrument within a larger package of measures.

Salary improvements instead of job cuts?

Postponing or temporarily suspending salary adjustments can also reduce costs in the short term. The advantage is that the effect can be achieved quickly and across a larger part of the organization.

However, this measure is sensitive. Employees may perceive it as unfair – especially if it is unclear why it is necessary or if high expenditures remain in place elsewhere. Therefore, credible and transparent communication is crucial.

Furthermore, it can quickly lead to the loss of top performers and high-potential employees. Such a measure can only be useful temporarily, for example, by postponing a planned salary increase for a few months.

Partial retirement and early retirement

For employees approaching retirement, phased retirement or early retirement schemes can be a socially responsible way to reduce staff in a planned manner. Such programs can help reduce capacity without resorting to layoffs. However, they often entail significant one-off costs.

Furthermore, companies should consider early on how to safeguard important experiential knowledge. Long-serving employees, in particular, often possess know-how that cannot be easily replaced.

Termination agreements and voluntary programs

Another option is individual termination agreements . Employers and employees mutually agree to end the employment relationship, often involving severance pay or other benefits.

This approach can be implemented in an even more structured way in the form of a voluntary redundancy program . Employees are given the opportunity to leave the company voluntarily within clearly defined conditions. The advantage: Those affected retain more autonomy, while the company can manage staff reductions in a targeted manner.

However, there is also a risk here. If a program is too broadly open or particularly attractive, precisely those employees who have good job prospects and would remain important for the future organization may leave.

Volunteer programs therefore need a clear definition of the target group and professional management.

Why simply completing individual measures is problematic

In many companies, restructuring follows a similar pattern: First, a hiring freeze is imposed. If that's not enough, further cost-cutting measures follow. Then, severance packages are offered – and a few months later, redundancies are issued.

This approach may seem cautious at first, but it can be very stressful for the workforce. Every new measure raises the same question: Is this the end – or will there be another wave of layoffs?

If this uncertainty persists for months, motivation and trust can suffer considerably. The situation becomes particularly critical when high performers voluntarily leave the company because they no longer see a clear future. Therefore, it makes more sense to develop a comprehensive strategy early on and define from the outset which measures will be implemented under which conditions.

Redundancies may still be necessary.

Even with careful planning , redundancies cannot be avoided in every restructuring. Therefore, the crucial point is not so much the idea of preventing redundancies altogether, but rather treating them as a last resort and preparing them professionally.

If it is clear which alternatives were previously examined and why they are insufficient, necessary decisions can be communicated more effectively.

Equally important is how the affected employees are treated. Professionally conducted separation discussions, transparent communication, and concrete support for career reorientation can significantly mitigate the impact of job cuts.

Outplacement as part of responsible workforce reduction

When employees have to leave the company, the separation process should not end with the signing of a termination agreement or the dismissal.

Professional outplacement consulting can help those affected to develop a new career perspective as quickly as possible. This can include, for example, a career assessment, the development of an application strategy, the optimization of a resume and LinkedIn profile, and preparation for job interviews.

This is also relevant for companies. Remaining employees closely observe how colleagues who have to leave the company are treated. A respectfully managed transition can therefore help maintain trust and employer attractiveness despite restructuring.

Conclusion: The right combination is key.

There is no single ideal alternative to redundancy .

A hiring freeze can be a sensible option if sufficient time is available. Short-time work is suitable for temporary periods of low demand. Internal transfers and training can retain expertise within the company. Phased retirement, severance agreements, and voluntary redundancy programs allow for a more predictable and often more socially responsible reduction in staff.

It is crucial not to use these instruments in isolation or only under acute time pressure. Companies should define early on what the future organizational structure should look like, which skills it will still need, and what workforce reduction target actually needs to be achieved. Only then can a sensible decision be made about which measures should be combined.

Restart Career supports companies in managing restructuring processes through professional outplacement and career guidance. This provides departing employees with concrete support for their next career move – and enables companies to manage necessary changes responsibly.