Press Room: Article

May 28, 2009

The Hidden Costs of Downsizing

In today’s economy, businesses large and small are faced with the increasingly difficult goal of staying profitable.

To avoid operating in the red, many employers are downsizing their current operations. This trend has been monitored closely by the U.S. Department of Labor’s Bureau of Labor Statistics (BLS), which recently reported that April nonfarm payroll employment continues to decline and the unemployment rate rose from 8.5 to 8.9. Since the recession began in December 2007, 5.7 million jobs have been lost. With many corporations making headlines with recent announcements of pending job cuts, it is unlikely that we have seen the end of these cutbacks.

The major objective of any downsizing is to reduce costs (e.g., reduction of payroll, streamlining functions, etc.). Whether this strategy involves the closing of a single plant, eliminating an unprofitable division, or laying off employees across the board, careful planning is necessary to minimize employment tax costs or to understand what the additional cost of a downsizing may be…

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