How to approach layoffs, furlough, and pay cuts during COVID-19

In this 4-minute read:

  • Why laying off employees due to business concerns during COVID-19 is different
  • Ways to mitigate the bad feelings that can result from layoffs
  • How you can help employees transition to new jobs

Firing an employee usually ranks right at the top of the list of unpleasant tasks business owners have to perform. It’s not ever fun for manager nor employee, and there are a lot of ‘how to fire someone’ guides you might want to consult if you’re looking for general advice.

In this article we’ll be dealing specifically with ways to mitigate negative experiences if you have to lay off one or more employees due to the financial impact of COVID-19, or have been forced to reduce employees’ pay.

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Some businesses have seen enormous revenue and sales gains during the pandemic, like grocery stores and sporting goods retailers. However, restaurant, bar, salon, and health services revenue dropped off a cliff due to the global lockdown.

Many small businesses simply couldn’t weather this socioeconomic superstorm and have shuttered for good. Many more are on the brink of going out of business, and have had to look for extreme ways to keep the doors open. Since cutting staff is one of the items on the “what to do if we’re desperate” list, let’s go over some ways you can soften the blow a little (hopefully).

Please note: this article is for informational purposes only, and it not intended to be legal advice. Different states and locations have different laws regarding the procedures necessary to fire an employee, even during COVID-19. Be sure to consult with a business attorney and/or your state employment office to make sure you’re compliant.

Limiting your business’s hours of operation (and cutting staff) may be necessary to survive COVID-19 

Depending on your unique situation and business model, it may not make sense to maintain the same hours of operation as you had before the pandemic, especially if the demand isn’t there as foot traffic has dropped dramatically or inventory/supply chain problems have reared their heads. 

Many businesses have decided to cut back on their typical “open” hours daily to allow for increased sanitization requirements, customer accommodations, more lengthy checkout processes, and other factors.

You may also have a constrained ability to service clients, because of social distancing measures during COVID-19. Perhaps you can only allow a limited number of people in your business at a time, and because of that, you have to plan for smaller demand until social distancing measures are lifted.

Since these modifications necessarily cut into overall profits, you may have to adjust your headcount or cut employee hours as a result, or let some staff go entirely. 

Provide advanced notice to your employees if you’re struggling

Hopefully you’ve developed a relationship of trust with your employees, and a good leader will keep the lines of communication open rather than hide the fact that the business is having serious trouble making payroll due to COVID-19.

Some business owners feel embarrassed that the business is on the point of failure and don’t want to “worry” their staff by letting them know the situation. It’s always better to keep everyone informed. You don’t need to scare them unnecessarily, but being up front with them about the situation and treating them like valuable members of your team will help assuage negative feelings.

Emphasize that this is a necessary course of action to save the business

Due to the global and multifaceted impact of the COVID-19 pandemic, people may tend to be more understanding and less hurt by the decision you might have to make to lay off some employees as a result.

You might express to your staff the dire financial circumstances all American small businesses are facing, and that you’re doing everything you can to keep your doors open.

Offer furlough, benefits only, or reduced salary where possible

Depending on your local laws, you may be able to furlough some employees or cut salaries to save their jobs. Nobody is happy about being fired, laid off, or furloughed, but it can reduce the sting a little if furloughed employees know they’ll have their job ready to go once you get the business back up to speed.

Furloughed employees don’t receive benefits or pay, but they may still have positive feelings or loyalty to your business, and they may be valuable employees with knowledge gained from long experience. If you can explain the need for furlough in the right way, these employees may be able to hold on financially by taking part-time or temp jobs in the meantime and be ready to return to your staff once you’re back on your feet.

Another option is to discuss the need for a reduction in salary for all employees and let them make the decision to leave or stick around with a temporary pay cut. Some people may need to leave their jobs to find something with a similar pay grade, but some might choose to stay until you can start paying them what they’re worth again. In these crazy times, having a job, even at a lower salary, may be very attractive to some employees.

In some cases you might be able to keep key employees on your benefits while they’re “on leave,” which can cut your employment costs dramatically while still keeping loyal employees covered by insurance, etc. Talk to your business consultant about this option and see if it makes sense in your situation.

Offer assistance in finding employees a different job, or applying for unemployment benefits

After you have clearly discussed the situation with your staff and presented the potential for necessary layoffs, give your employees as much time as you can to find employment elsewhere. If you have connections in the business community, ask around and see who’s hiring and recommend those businesses to your employees, and offer to set up introductions and interviews.

If they’re interested in staying in the same industry, direct them to job boards or online job listings or services you may have access to as an employer.

If you are forced to lay off employees and they don’t have prospects for another job immediately, consider offering them assistance in applying for jobless benefits, provide information and resources for unemployment offices in your area, etc.

Improve your business’s chances for recovery and future growth by improving your online visibility

As you have adjusted your business’s physical space to the pandemic, and possibly had to cut staff to save expenses, you also need to make sure your online presence is solid so that people can actually find you and start spending money with you.

Even small, local shops need a good online footprint today because almost everyone checks reviews and business details online before visiting, even if they get a personal recommendation from a friend or see your marketing materials.

Some ways to help you show up in local searches are getting regular online reviews to your Google, Yelp, and Facebook listings and also creating new online directory profiles across other web directories. 

Womply Reputation Management can help you improve your online presence. Our software will help you manage all your online reviews from one place. You can also respond to your customer reviews from your Womply dashboard. 

Womply also offers business intelligence, customer relationship management, email marketing, payments, and a dynamic customer directory that updates automatically with each transaction.

Learn more, plus get free reputation monitoring and customer insights when you sign up for Womply Free!

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