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As the economy tightens up, you may find the need to downsize your business. Downsizing should be planned as thoroughly as starting a business.

Although there are many aspects to downsizing, reducing your workforce is probably the most significant aspect to consider. If you don’t have enough work for all your employees, a reduction in force can significantly reduce your expenses.

However, just because you need to downsize doesn’t mean you can use it as an excuse to get rid of the employees that you don’t like. You are not exempt from discrimination and wrongful-termination claims in choosing who is laid off. If you find yourself defending such a lawsuit, the cost in attorney fees will far exceed the savings in wages.

Structuring Your Layoffs

You must structure the layoff appropriately and legally. Make sure that there aren’t any unusual restrictions on layoffs. These would be found in your own employment manual or a collective-bargaining agreement with your employees, if you have one. Check these documents first. State or federal laws may also govern layoffs, depending upon the number of employees you have.

Start with a reduction plan, which is very similar to a business plan. A business plan plots out the first five years, determines what is needed and how it will be achieved over time. With a reduction plan, you also look at what your new, smaller business will need and how you will meet those needs over the downsizing period.