Questions like this are flooding the phones here at Employers Council. In extreme times like these, business leaders must take action to both manage the immediate crisis and plan for the longer-term. Avoiding panic is crucial to sound decision making. COVID-19 is a temporary crisis of severe concern; it will pass and business leaders should seek counsel and take action carefully. Here are some factors to consider.
- Labor costs are typically the highest expense item for a business. As such, cutting employee costs is often the first move.
- Despite the current situation, the underlying demographics still point toward a long-term shortage of talented employees. As such, move cautiously and strategically to assess current and future needs. When the economy improves, eroded bench strength puts businesses at a competitive disadvantage.
- Conducting an open and transparent conversation with employees about the current challenges may open up ideas to help the organization stay solvent. Employees are fully aware of what is happening and many will appreciate the chance to problem-solve.
- Options for reducing labor costs include:
- Reduced hours
- Pay reductions
- Voluntary early retirements
- The federal government is encouraging state agencies to approve unemployment claims for a wide array of employees impacted by COVID-19, including:
- Those who are sick and need time to recover
- Those who must care for an ill family member
- Those who must self-isolate or are under quarantine
- Those sent home due to lack of business, or reduced hours
- A spike in unemployment insurance claims will increase the future premiums paid by the employer.
Even in extreme times, there are laws that require careful attention to avoid running afoul of them and long-term penalties.
- WARN Act: COVID-19’s impact on many businesses likely qualifies as an “extreme business situation”. For mass lay-offs, follow posting requirements even if it is after the lay-off.
- Title VII and ADEA: Choose carefully who is laid off to ensure there is not a disparate impact on those of a protected class.
- FMLA: Employees still have FMLA rights.
- ADA: Some employees may request an accommodation to consider.
Pivot and Partner
- Already there are stories in the news of companies who are pivoting their business model to address the challenges and opportunities presented by COVID-19.
- Employees are often a rich source of innovation – when asked.
- Businesses may seek out new partners to leverage their resources and business models. Example: Excess restaurant kitchen facilities may be used for a meal delivery service.
Cut costs and Invest
If sales are slumping or projected to drop, now is the time to cut costs on budget items that do not support your business strategy, provide essential value or leverage resources that would be too costly on their own. “Across the board” cuts are easiest to impose, yet may have devastating consequences to long-term strategies. Even as the economy may be on the verge of a slowdown, interest rates are at record lows. This may be a time for bold action to seek financing to invest in expansion, new equipment or business transformation.
Monitor and measure
As employees are sent home to telecommute or other flexible work arrangements are created, stay aware. Are these new ways of doing business successful and provide unforeseen beneficial outcomes? Are surprising new opportunities generated? Are employees happier with the new arrangement? If so, consider adding this as a permanent option.
Federal and state legislation is in the works to assist businesses and impacted employees. Consider not taking extreme action until the week is over to see what relief legislation passes.
Employers Council staff are monitoring emerging business conditions and working hard to assist our members through these difficult times. Reach out with questions and to discuss options.