Employee Downsizing

Tackling the Evils of Downsizing Contd...

Companies did not have to pay unemployment taxes, retirement or health benefits for contingent employees. Though these employees appeared on the payroll, they were not covered by the employee handbook (which includes the rights and duties of employers and employees and employment rules and regulations). In many cases, the salaries paid to them were less than these given to regular employees performing similar jobs. Thus, these employees offered flexibility without long-term commitments and enabled organizations to downsize them, when not required, without much difficulty or guilt. Analysts commented that in many cases HR managers opted for contingent employees as they offered the least resistance when downsized.

However, analysts also commented that while contingent employment had its advantages, it posed many problems in the long run. In the initial years, when contingent employment was introduced, such employees were asked to perform non-critical jobs that had no relation to an organization's core business.

But during the early 2000s, contingent employees were employed in core areas of organizations. This resulted in increased costs as they had to be framed for the job.

Not only was training time consuming, its costs were recurring in nature as contingent employees stayed only for their specified contract period and were soon replaced by a new batch of contingent employees.

Productivity suffered considerably during the period when contingent employees were being trained. The fact that such employees were not very loyal to the organization also led to problems. Analysts also found that most contingent employees preferred their flexible work arrangements and were not even lured by the carrot (carrot and stick theory of motivation) of permanent employment offered for outstanding performance.

In the words of Paul Cash, Senior Vice President, Team America (a leasing company), "It used to be that you worked as a temp to position yourself for a full-time job. That carrot is not there any more for substantial numbers of temps who prefer their temporary status.

They do not understand your rules, and if they are only going to be on board for a month, they may never understand." With such an attitude to remain outside the ambit of company rules and regulations, contingent employees reportedly failed to develop a sense of loyalty toward the organization. Consequently, they failed to completely commit themselves to the goals of the organization.

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Case Details

Case Code : HROB016
Themes: HR concepts and issues
Case Length : 09 Pages
Period : 1990-2001
Organization : Varied
Pub Date : 2001
Teaching Note : Available
Countries : USA, India, etc...
Industry : Varied

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