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In today’s uncertain economic climate, HR teams and business leaders are walking an all-too-familiar tightrope: how to manage costs without sacrificing the people who drive the business forward.

Layoffs often seem like the go-to solution for trimming expenses (2024 had the most layoffs since 2010)—but what if there were a better, more sustainable way?

Here’s a surprisingly economical strategy that helps avoid employee layoffs and boosts morale, preserves company culture, and strengthens long-term business performance: employee recognition programs.

After all, when your people are the ones reeling in ROI, they deserve to feel seen, valued, and motivated to keep going. And when they feel valued, the complexities of managing costs will be a thing of the past. Let’s break this down further.

The hidden costs of layoffs

On the surface, layoffs might appear to offer immediate financial relief. However, research from Harvard Business School, Forbes, and Bloomberg paints a very different picture.

Aside from direct costs such as severance packages and legal fees, layoffs come with a host of hidden—and costly—consequences, such as:

  • Loss of productivity as teams shrink and workloads increase.
  • Dip in morale and rising anxieties among remaining employees, which can lead to resignations.
  • Decline in productivity.
  • Loss of institutional knowledge that’s expensive and time-consuming to replace.
  • Damage to the employer brand and public perception.
  • Laws and regulations around layoffs can vary across states and countries, which can make the process complex. Even small mistakes can result in substantial financial repercussions.

The reduction in performance layoffs bring, ultimately turns a “solution” into a long-term setback.

How recognition programs help avoid layoffs and downsizing

What if you could protect your workforce—and your bottom line—at the same time? Employee recognition programs offer an efficient, impactful alternative to layoffs.

Here’s how quality recognition programs help prevent layoffs:

1. They’re cost-effective (compared to layoffs)

Recognition doesn’t have to mean big bonuses or lavish gifts. Through platforms like Awardco, you can build tailored programs that reward behaviors that are aligned with business goals without overspending.

Think points-based systems, peer-to-peer recognition, and meaningful shout-outs that cost less than the average severance package…and yield far greater long-term returns.

For context, let’s look at some data:

  • Productivity cost: Moreover, data illustrates that after a layoff, the output of the remaining employees falls, for a few months at least, due to low morale and anxiety. This typically comes to around “a $50,000 monthly loss for every 100 remaining employees.”
  • Resignation cost after layoffs: Layoffs often lead to resignations. For companies with a workforce over 10,000, replacing staff can cost $75 million or more.

In contrast, a quality recognition program can boost productivity and engagement as team members experience and enjoy the immediate effects of recognition. The increased productivity and engagement may head off a layoff, because sometimes, all it takes is a thoughtful thank you to instill confidence and value in someone.

Here are some numbers that further expound on this:

  • The cost of a quality recognition program? Let’s just say Awardco’s customers spend on average ___ for their recognition program.

Layoffs vs. recognition programs

Category Layoffs Recognition Programs
Cost of Productivity Loss $50,000/month per 100 remaining employees Boost productivity & morale
Resignation & Replacement Cost $75 million or more (for companies with 10,000+ employees) Reduce turnover by 31%
Ongoing Employee Sentiment Low morale, anxiety, disengagement Increase engagement by 85%
Program Investment High severance, legal, and PR costs As low as 1% of payroll
ROI Long-term costs due to churn and burnout Long-term gains via retention & productivity

Use this free calculator to organize your workforce’s employee recognition budget.

2. They help manage budget cuts more strategically

Raises and promotions may be off the table during tough times, but appreciation never goes out of style.

Recognition platforms allow HR teams to implement creative solutions like:

  • Tiered or non-monetary rewards
  • Public acknowledgments
  • Peer-to-peer recognition
  • Experiential incentives (like extra time off)

This keeps employees motivated and engaged, even when traditional compensation freezes.

3. They boost employee productivity

It’s no secret: employees who feel seen and valued are more likely to go the extra mile. Studies show recognition increases engagement, which in turn boosts productivity and reduces the risk of turnover.

In essence, you're maximizing the output of your current team instead of cutting it down.

4. They are encouraging in times of crisis

JetBlue saw an 88% boost in employee satisfaction after launching a peer-to-peer recognition program centered around its core values. The impact isn’t just emotional—it’s physiological too. Studies show that expressing gratitude triggers the release of oxytocin, a hormone linked to feelings of connection, calmness, and cooperation.

Employees who feel secure and appreciated are more willing to contribute ideas, improve processes, and support one another. That collaborative energy is exactly what businesses need to weather financial storms and stay competitive.

Recognition creates a psychological safety net—one that encourages people to stick around and speak up, even when things get tough.

Here’s what industry experts have to say…

Don’t just take it from us. Professionals across various industries speak to the power that recognition programs can have in safeguarding the longevity of your workforce and business:

  • Cisco leverages a recognition platform funded at 1% of payroll. The company's senior vice president of acquisition & total rewards reports: "Recognition is an investment in people. It’s going to retain talent. If you’ve got the right talent, you’re going to drive revenue growth. It’s an initial investment with a future payoff."

  • MagnaFlow uses Awardco’s software to boost morale and mitigate turnover. Sonia Magdaleno, Talent and Engagement Specialist, notes: "Our turnover definitely went down after implementing Awardco, especially compared to the previous year. We’ve noticed that recognition, along with rewards like Amazon items and prepaid Visa cards, has had a big impact on retention…without being a huge cost to the company."

Explore more Awardco stories.

No matter what industry your company is in, whether that’s HR, finance, or tech, there’s a right recognition platform for your teams.

Layoffs aren’t your only option. Lean on Awardco.

The truth is, employee recognition isn’t just a “nice to have”—it’s a business necessity, especially when every dollar counts. It’s a proactive, people-first approach to avoid employee layoffs while fueling productivity, engagement, and loyalty.

Instead of reacting with cuts, forward-thinking HR leaders are choosing to invest in their people—and they’re reaping the rewards.

Ready to explore how recognition can help your organization weather financial uncertainty? Discover Awardco’s rewards and recognition platform.

And if you’re already managing the aftermath of layoffs, this guide can help you support remaining employees in meaningful ways.

Article written by
Jefferson Hansen
Content Specialist

An avid lover of fantasy books, a proud Hufflepuff, and a strong proponent of escapism, Jeff has a love of good storytelling. He relies on that for both his professional work and his writing hobby (don’t ask about the 10+ novel ideas collecting virtual dust on his computer).

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