Strategies for making layoffs a last resort during a crisis

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In uncertain times business leaders can be faced with an impossible choice, keep every employee or keep their business afloat.

More than 6.6 million Americans have applied for unemployment, according to the Labor Department and there have been over 10 million jobless claims, as a result of the coronavirus pandemic keeping people in their homes and out of work. It is likely that businesses will make further cuts as the latest PwC survey suggests 44% of CFOs expect furloughs and 16% expect layoffs.

The unfortunate reality for many small businesses is that there typically isn’t an alternative to layoffs, but larger organizations have more options.

“There are several firms in the U.S. right now, including our own, that have publicly said layoffs are a last resort,” says Bhushan Sethi, PwC’s global people and organization leader. “What they are looking to do is be creative with the different levers you can pull around the workforce.”

Sethi in a recent interview shared ways in which employers can make layoffs a last resort in times of unpredictability.

How can businesses avoid layoffs during a crisis?
There’s looking at compressed work schedules, reducing costs in other areas, including real estate or business travel. There are other benefits employers may be offering that are not relevant like a car allowance or a travel allowance. Even before COVID-19 we’ve seen clients take a look at a compressed work schedule. Employers need to understand what it means if they offer a compressed work week, whether it is 40 hours across four days or in some areas it might mean one week on, one week off. So the compressed work weeks can take on different forms. Changing the pay would be next, and looking at the areas of your firm that have significant costs and looking at where value is created. What that could mean is changing the mix of pay at the executive level. Certain companies have come out and froze or capped executive pay or said executives won’t take bonuses. So there’s different levers on the compressed work schedules and on the pay models and then there are other kinds of cost control measures you can take.

How are employers designing benefits during this time?
In our CFO survey we saw that 56% of them were also looking at other benefits, specifically things like paid time off and sick leave. A number of them are saying “how do I design benefits around what my people want?” At PwC we said we’re going to give an emergency child care allowance to people who need it for $2,200. We’re seeing this shift around what you can offer your employees from a benefits perspective that might be very relevant to them. I’ve seen other clients say “well if there is a small piece of equipment that will help you with remote working like investing in a different shaped chair or something like that,” it seems trivial but it's really important to people’s experience right now.

How can employers reassure their remaining staff when they have to make staffing cuts?
It’s still an opportunity for firms to start planning beyond just today’s business. You’ve got to project out maybe 12 months and say what will my revenue and my profitability be, based on some assumptions being made around the business. The more you can get employers to actually think about kind of financial impact then you can walk it back and say okay, I‘ve got to ask about the costs I need to manage and how can I be creative by not just looking at payroll and salary and benefits, but how can I think about other levers I can pull? Can I offer sabbaticals to people? Can I do compressed schedules? Can there be job sharing in certain key rolls? Looking at all the different levers around it is going to be important because then you may actually get to a decision that is more beneficial for your employees, for society, and your business because you won’t be in the process of having to lay off a significant amount of people and cause reputational damage to the business.

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