Employment challenges in the era of sequestration

Job losses. Furloughs. Salary reductions. These are some of the tough employment issues facing contractors around the nation as sequestration and federal budget cuts have taken effect in 2013. The squeeze on contract spending has taken a substantial toll on government contractors, who have seen contracts and orders delayed, descoped, deferred and terminated.

When faced with these types of contractual changes, employers often are forced to cut costs in one of the most significant areas of spending: labour. After calculating salaries, leave, healthcare, retirement benefits, insurance, taxes, overheads and collective-bargaining costs, labour is usually the most significant cost driver for employers, particularly in the services industry. And for some government contractors, an extra layer of complexity might be added in the form of mandatory wage determinations, affirmative action requirements and oversight of subcontractors.

In this new era of fiscal austerity, employers face hard decisions regarding whether to reduce the hours, wages or numbers of their employees; to relocate employees to more cost-efficient locations; or to offer voluntary separation programmes prior to commencing a reduction in force. When considering these options, contractors should be aware of the hidden obligations that could create liability…

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