When you own a small business, you know that there are times of financial hardship. Usually, these times grow and shrink based on the country’s economy, and whether you like it or not, you will most likely face cuts backs sometime in the life of your business. One of these cut backs can involve laying off employees.

While no one likes the idea of having to lay off someone, there are ways that you can handle it to help the whole situation become less stressful and frustrating. Before you face dealing with layoffs, consider this information. No matter how small or large your small business actually is, you will be better prepared for facing financial trouble with a little forethought.

Before you ever even have to consider laying off anyone, make sure that your employees know the situation. While you do not want to tell them everything about the business, letting them be aware of certain things is important. If you foresee the possibility of layoffs, let your employees know.

You can do so by having a companywide meeting. Explain that financial times are getting rough and although you will do everything you can to avoid it, you may have to lay off people soon. Although this will not boost morale, it will help to avoid blindsiding people when you have to cut their job.

During this meeting, tell your employees the truth. Let them know that there are problems and it may take a while before they get better. Do not make any promises you cannot keep. Make sure that they understand that you may very well have to lay people off no matter how hard you try.

Give your employees time to share their thoughts, feelings and concerns. You may have to fields some very hard questions, but it is important to keep an open line of communication at all times.

Remember that your employees have families and responsibilities of their own. Giving them a little heads up can save them from a financial crisis since they will have time to plan for the impending situation.

Before you have to lay off anyone, consider cutting salaries a little or stopping bonuses. You can save quite a bit by shaving a little off of everyone’s salary. You can also cut out bonuses and company retirement contributions for a short period. While this is a temporary solution, it just might be enough to get you through the slow time.

Employees may not like the pay reduction, but if you explain that it will help to keep the company from having to cut out jobs entirely, you will be able to help them understand. Keeping employees abreast of the business situation can go a long way, and by your being honest with the reasons behind your actions, employees will be more understanding.

You can cut costs also by reducing hours and overtime. If you have a lot of employees working overtime, do your best to eliminate this. While you legally have to pay the overtime when the hours are worked, you can explain to your employees that you just cannot continue to pay it without someone losing their job.

If possible, find ways to cut back on employee hours without making their own lives too much of a financial strain. Just as with small pay reductions, small hourly reductions across the board will add up to a large savings as a whole.

Make sure that through the whole process, you give your employees the chance to talk with you. Whether they need to rant about cuts in pay or they need to voice concerns about their job, let them. The more honest and open you are with your employees, the better the situation will end.

If you have done everything you can and you still have to lay off employees, there are certain steps you can take, and certain things to avoid, to make the process a little better.

Do not tell an employee to not take things personal. The bottom line is, any lay off is personal. You are dealing a heavy blow to your employee and it is going to be hard. Try to see things from your employee’s perspective and be aware of their feelings.

Make sure you handle the lay off in a private setting with no one else around. This will give your employee time to compose themselves before they have to face their co-workers. Give them time to say goodbye and to gather their things. If possible, allow them to stay until the end of the day.

Most importantly, offer any help you can. Provide them with information about how long their insurance will continue, when their last paycheck will process, and how to apply for unemployment.

Layoffs are difficult to face, and if you find they are unavoidable, being a caring and open boss can go a long way toward lessening the shock of the experience.