Kyle T. Webster

Joseph Smith, general manager at Owings Home Services, in Eldersburg, Md., recently rehired two employees — one who left to start his own company, just as the recession began; the other laid off because he was underperforming.

The self-starter had left on good terms and kept in touch with Smith. Of the underperformer, Smith says: “We rehired him ... and he is like a new man. Three to four months off work changes someone’s perspective.” Smith interviewed both employees as if they were new hires (see “Legally Speaking”), and restructured their compensation packages with a lower base salary and additional incentive-based compensation.

When Kent Eberle, president of Eberle Remodeling, in Sacramento, Calif., laid off three staff last December, he did so with the intention of hiring them back. Many of his laid-off staff worked for him sporadically through the winter, confident that Eberle, in business 26 years, would soon enough find more work.

“Once I started signing design projects and could foresee that I was going to keep a stream of work going, I talked to them,” Eberle says. All three returned to full-time work in March.

In 32 years in business, David Tyson, CEO of David Tyson & Associates, in Charlotte, N.C., had never had to lay anyone off due to lack of work — until last November. Phone calls dropped off in February 2008, and though he tried additional marketing, by Thanksgiving Tyson had laid off three staff. When he sold a three-bathroom project, he decided to bring back one of the employees.

All Pull Together

But for Tyson, as for others, the cutbacks went beyond just cutting staff. He also cut benefits for his five remaining employees, including vacation days, holidays, bonus, personal time, and health insurance. “I need to generate profits to pay for those things,” he explains.

At Owings Home Services, the owners took a pay cut first, Smith says, and later, employee pay was cut 5% to 7%, based on the employee’s position or tenure. The company adjusted the amount of health care costs it pays for particular employees, to make benefits more uniform for all staff. Smith says that the health benefit changes are permanent but that the company plans to reinstate salaries when work picks up.

The management team at Allen Associates, in Santa Barbara, Calif., took significant pay cuts a few months before asking staff to do so as well. “We were optimistic that cutting management would be enough, but it was hard to predict,” president Dennis Allen says. Office and salaried employees’ compensation/hours were cut 15% to 25%. Field people worked whatever hours Allen could give them.

“The shortfall was partially made up by getting work-share money from the government,” he says, referring to California’s Work Sharing Unemployment Insurance program, which allows employers to cut employee hours and make up for that income loss with unemployment benefits. Tyson used a similar North Carolina program when he cut hours for staff.

Allen Associates restored all employees to full compensation and hours by the beginning of 2010, and also restored 401(k) contributions that it had cut at the end of 2009. Allen says that pulling together has enhanced the employee-owned company’s culture.

Ric Bonasera, general manager and managing partner at Remodeling Solutions by Frey, in Bonita Springs, Fla., had provided his employees a quarterly bonus based on profits but cut that during the recession. The company also used to pay 100% of employees’ health insurance; it now pays 75% of the cost. But, Bonasera says, he attributes that to rising health care costs not to the recession.

—Nina Patel, senior editor, REMODELING.