The pandemic is proving to be a difficult time for businesses and employees worldwide. As the virus spreads, the society, economy and businesses are being impacted. With businesses being shut for more than four months, many are downsizing their operations with layoffs. Whilst keeping the business running and minimizing losses, companies should be careful as well as compassionate about lay-offs and salary reductions.
A business owner should explore every possible option of cost saving before agreeing on a lay off. Employers should understand that while there is a tremendous economic loss, this is a pandemic and downsizing of employees can have a long lasting effect on individual businesses as well as the economy as a whole. The company should evaluate the losses and distribute it into all the departments rather than only HR.
- Companies issuing heavy dividends to shareholders and higher management could think of reducing or not paying dividends which may save a few jobs
- Working from home could save companies on rents and expenses that can be used to pay off staff salaries
- Try downsizing asset usage such as renting small offices instead of large ones and use the savings to save jobs of those who can work from home
- Overseas or domestic business meetings can be managed through video conferencing thus reducing costs for travel
- Consider decelerating pay decreases for lower salary ranges to protect employees who are the most vulnerable. For example, one might reduce salaries of the highest paid employees by 10%, mid-range salaried employees by 5%, and everyone else above a certain threshold by half of that.
- There might be a dip in VC or HNI funding in the short run. Investors will be more vigilant and may take longer than usual to make funding decisions after following stringent diligence procedures. In order to extend the runway, businesses can approach existing investors for additional funding. Since, they are already invested and more likely to help during these stressful times.
- Maintaining healthy relationships with contracted parties will help sustain the business in the long run. It is obvious that there might be difficulties to pay out vendor/suppliers during the lockdown. However, it is advisable to give them sufficient notice in case there is going to be any delay in payments so that they can also be prepared and there is no bitterness in this already difficult time.
Going through a downturn and making tough decisions to keep the company afloat is hard. Employers should deal compassionately with staff and provide some incentives for certain period of time. This will help employers to come out of this slowdown stronger and imbibe company values for the future. The key is to communicate with the employees and be clear about the company goals for the next few months.