COVID-19 Resources

Things to Know Before and After Reducing Your Company’s Workforce During the COVID-19 Pandemic

Written by David Salters, Kelly Cochran on April 23, 2020

Only a few weeks ago, companies were largely focused on competitively attracting talent by offering the best benefits and formulating the best hiring strategies. Now, companies are suddenly making decisions about reducing their workforce that they weren’t expecting.

The unfortunate reality is that, currently, many businesses are faced with the difficult and emotional decisions to reduce their employees’ pay or hours, or even institute furloughs or layoffs. For businesses faced with these challenges, we’ve outlined a few items to take into consideration both before and after reducing your company’s workforce.

Listen to Business Advice Amid COVID-19: Human Capital and Employee Matters, a special edition episode of The Wrap, Warren Averett’s podcast.

Considerations for Preparing to Reduce Schedules, Reduce Pay or Institute a Reduction in Workforce

If your business is looking to reduce your workforce, consider these factors to help minimize the impact on your business and on your employees.

Assistance

Businesses that qualify may find support and viable options through the recently-passed CARES Act, such as expanding access to 401(k) funds. Before initiating a reduction in workforce, businesses should review the Act to see if the provisions within can provide assistance for their specific scenarios.

Internal Communication

Regardless of your company’s plans or position, your employees will be hungry for information. Whether you’ve indicated a reduction in workforce or not, your team members are likely concerned, and it’s important to communicate frequently and openly with them. One of the most important things you can do is to be authentic and honest. Companies that foster an environment of trust and authenticity—even in uncomfortable situations—will be more likely to rehire their team members down the road.

Compliance with Labor Laws

Even during unusual times, it’s important to remember what your business needs to do to say in compliance with applicable labor laws. Keep minimum wage regulations and exemption status in mind when you are making decisions about reducing your workforce.

Government Unemployment Benefits

If you are instituting reduced schedules, layoffs or furloughs, ensure that they are structured in a way that allows your employees to qualify for unemployment benefits. To qualify for unemployment, an employee’s pay must fall below your state’s weekly threshold, so if your business is looking to reduce schedules, doing a week on/week off rotation may be more beneficial than simply cutting their hours in half. (Plus, if employees qualify for state benefits in a week, they will also qualify for the unemployment benefits outlined in the CARES Act.)

Company Insurance Benefits

Check with your insurance broker and carrier to see if they are relaxing eligibility guidelines, allowing furloughed employees or employees with reduced hours to remain covered, as long as premiums are paid.

Company Policies

Unless your business is under a union contract, another type of employment agreement or a state law that says otherwise, you don’t have to allow your employees to use their earned paid sick or vacation time after a reduction in workforce. You are able to suspend those benefits during a layoff, a furlough or reduced schedules.

Considerations for Preparing to Re-staff Your Company After Layoffs or Furloughs

Here are a few things to keep in mind when your company begins to rehire your employees or recruit new team members after a layoff or furlough.

Competition for Rehiring

When your company begins to consider rehiring, it’s important to understand that competition for the talent you want for your business will be different than ever before.

Some employees may drop out of the labor pool entirely, whether it’s because they must stay home to provide care for a family member, including children, or because their income is higher by accepting unemployment benefits. Even still, some employees your business had wished to rehire will take other jobs and be unavailable when your company wants to rehire them.

It’s important to think about alternative hiring strategies because the employees you have now may not be available in the future.

Contingent Hiring

Consider a contingent workforce, even for positions that were previously held as full-time roles. This approach can help meet your company’s customer demand while also being financially savvy with your business’s payroll burden.

New Talent Pools

Your business may have the opportunity to recruit employees who were previously unavailable to you. With an expected increase in remote work, your business may be able to do more activities remotely. This may open up the talent pool for your company to recruit new hires located in other geographic areas, who you may not have considered previously.

Work Incentives

To combat the additional unemployment, emergency sick leave and expanded FMLA benefits provided by the Families First Coronavirus Response Act and the CARES Act, employers may need to consider providing additional or incentive pay to encourage employees to come to work. Any additional pay would likely have to be factored into overtime pay for hourly employees per wage and hour rules.

Connect with an Advisor

For more information about how companies can best navigate the challenges associated with the COVID-19 pandemic, please reach out to your Warren Averett advisor directly, or ask one of our team members to reach out to you.

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This article reflects our views at the time this article was written and should be used as reference only. We recommend that you talk to your Warren Averett advisor, or another business advisor, for the most current information or for guidance specific to your organization.

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