Pay dayAlthough the Great Recession didn’t hit Canada as hard as it hit America, it still hurt. Case in point?

David Herle notes in an article that “Canadians didn’t have to deal with the collapse in housing prices, and not as many lost their jobs.”

But they still felt pain—up to half a million Canadians lost their jobs during the Great Recession.

Fortunately, the Great Recession is slowly lifting, but some companies found unique ways to get around layoffs and meet their existing payroll’s needs.

If you’re a start-up company and you’re going through the tough times, what can you do?

Here are some tips for how to compensate employees without money:

Arrange work-share

This great idea is uniquely Canadian. If business activity slows down, and it’s beyond your control, make use of work-share. In this scenario, employees have their work temporarily reduced, while Service Canada helps provide income support. Find more details at the Service Canada website.

Ask employees to take unpaid leave

Instead of laying off thousands of employees like so many corporations did during the Great Recession, Honeywell asked them to take furloughs. Honeywell’s CEO noted that the conventional wisdom states it’s better to lay off employees because it spreads the pain to just a few individuals. This compares to furloughs, which cause many people a little pain, but in theory hurt morale more than layoffs.

His argument was that laying people off and then hiring them again later when the recovery came would cost more than furloughs. Instead, those employees, if on furlough, would be ready to come back when business picked up again.

He doesn’t cite statistics, but he does believe strongly that it was a successful strategy.

Cut your own salary

This could be a huge opportunity to win your employees’ respect—share in their burden. Be willing to lead by example, and take a salary cut. Your employees will know that you have their best interests in mind when you take that sacrifice personally.

What to avoid

It’s a tough blow to your ego to have to admit you can’t make payroll. Fears of being known as a failure run through your head. When you’re so emotional, make sure you don’t try to hide the situation and deal with it at the last minute. That only makes your employees’ lives harder and their reaction more negative.

Instead, be honest and tell them as soon as you know. It may not be pleasant, but they’ll respect you more for doing so. Also, do note you absolutely have to pay. If you don’t, you could face serious lawsuits and tax penalties. Your options at this point:

  1. Hard money lending, which charges high interest rates
  2. Offer payment discounts to vendors who owe you money if they pay today
  3. Close up shop

To keep yourself from ever experiencing this situation, you can manage payroll online, tracking it precisely so you can anticipate potential problems and address them before they happen.

Hopefully you never have to face this situation—but if you do, these tips will help you find a way out.

About the Author: Carol Scott is an entrepreneur, business consultant & amateur podcaster.