Ask the Experts: Should I lay off employees from my small business?

With today's troubled economic conditions, more employers are facing this difficult question. Layoffs are no fun for anybody. It's hard for the workers who lose their jobs, it hurts the morale of remaining workers, and it can be a financial and emotional hardship for small business owners who typically have dedicated resources to develop their workers' skills, and often have social ties with their employees.

To help answer this question, first determine whether cutting payroll expenses is your best course of action. Remember, there is a cost to laying off, rehiring, and training employees. Perhaps it would be wiser to obtain an infusion of cash from investors, or cut other budget items instead, such as employee benefits.

Next, consider other options. For example, it may be better for both you and your employees if you retain everyone but reduce wages across the board.

Or, you could change your workers' schedules, cutting back hours. Now may be a good time to consider instituting a four-day work week or have full-timers become part-timers. Check to see if your state government will help by offering unemployment benefits to workers who must go part-time (a few states do).

If layoffs are necessary, carefully consider your business needs. Some persons may be vital to the success of your company, and laying them off may not be a valid option. On the other hand, this could be an opportunity for some housecleaning. Make your company more efficient by trimming excess staff, or letting go unneeded management and poor performers.

Before making any terminations or layoffs, however, seek legal advice to avoid any potential employee lawsuits. You'll need to comply with certain federal and state laws, and any employment or union contracts.