Lower demand for commodities worldwide, the threat of a credit rating downgrade, the drought and insignificant economic growth create a dim outlook for South Africa’s economy. In light of this, struggling South African businesses could consider cutting costs by following the global trend towards a shorter work week – as seen with Sweden’s recently implemented six-hour work day and Venezuela’s two-day work week – as a temporary measure.
This is according to Francois Wilbers, MD of Work Dynamics – a leading organisational psychologist consultancy in the country, who says that since future costs such as the salary of an employee is more predictable than future revenues, some employers choose to layoff under economic constraints. “An increase in layoffs in the country adds additional pressure in an already challenged economic climate.”
South Africa’s unemployment rate of 24.5% places it within the top twenty in the world and unforeseen layoffs only worsen the situation, he says. “It is time for businesses to try alternate methods to deal with the adverse impact of the economy on their financial wellbeing. Research shows clearly that the human consequences of layoffs are costly and particularly devastating for individuals, their families, and entire communities. While workforce reductions cannot always be avoided, there are compelling reasons why downsizing-related layoffs must nonetheless be seen as a managerial tool of absolute last resort.”
He says one of the alternate methods to layoffs is working shorter weeks (compressed weeks) or short-time. “The concept involves a temporary reduction in the number of hours in a workweek. A company may implement a 32-hour schedule and reduce short-range payroll expenditures. Such a reduction may reduce payroll cost by 20%.” says Wilbers.
However, a shorter work week should not be forced on the country as a whole, as there are some industries that are performing fine under current conditions, he says. “Those companies that are in financial distress may consider a shorter work week as the only “life line” short of layoffs.”
In order to implement shorter workweeks or days in an organisation, senior management would have to motivate for the need of wage adjustments. Management will also need to put together a comprehensive communication plan to convey to staff that the implementation is temporary and aimed at preventing layoffs, explains Wilbers.
“There is a compelling reason for this – employees receive a salary as part of a legal contract. Any decision along these lines cannot be made unilaterally. Management has to follow an approach of needing to engage with staff as they have a legal and a contractual obligation to do so.”
“An open and transparent dialogue with staff is essential when an organisation is experiencing change, as this makes employees feel included and helps them to understand the rationale for change.”
Wilbers adds that there are always pros and cons involved with organizational change. “With the implementation of shorter workweeks or days, employees might be more prone to raised stress and anxiety levels, due to the added pressure to reach the same output levels. From a national perspective the implementation of shorter workweeks will also mean salaries will have to be reduced proportionally or as long as the company remains in financial distress.”
While most employees appreciate the idea of being able to spend more time with their families, they may not always welcome a reduced paycheck, he says. “Another factor to consider is that employees may find that the same amount of work still needs to be performed, even if they spend less time on the job.”
The South African situation is thus very different to that of Sweden, as an example, where fulltime wages are applied to the six hour work day, says Wilbers. “This type of change can only be implemented in a strong economy where production and employee productivity is already high. Additionally, this system relies on mutual respect between employee and employer to maintain productivity.”
“The shorter workweek is an interesting concept that may prove to increase employee productivity, but at this stage its greatest potential in South Africa is to avoid layoffs,” concludes Wilbers.