How to avoid employee layoffs due to the coronavirus outbreak

There’s been a lot of news about layoffs due to the coronavirus outbreak. Scandanavian Airlines laid off around 10,000 employees temporarily. The number of employees laid off is nearly 90% of their staff. MGM Resorts immediately let some staffers go and said it would furlough workers and begin layoffs over the coming weeks. The Port of Los Angeles said they let go of 145 drivers after ships from China stopped arriving.

But small businesses are taking a much harder hit. As Americans have practiced safe social distancing and pulled back from daily routines, consumer spending has dropped. And local shutdowns have forced many small businesses to close their doors temporarily. And more are grappling with the fact that they might not make payroll as a result.

No business owner wants to let employees go. After all, 8 in 10 business owners say they care about their employees like family. And 1 in 3 has used their own money to cover payroll in the past. They’ve taken financial hits, so their employees didn’t have to, according to a 2019 survey of construction business owners. Business owners are well aware of the financial implications a layoff could have on their employees, their business, and their reputation. But many don’t have a choice. Thankfully, business owners have alternatives to explore.

8 alternatives to employee layoffs

1. Eliminate extravagant costs immediately

That means no more team lunches, coffee runs, or nonessential office supplies. Explain to your team that money is tight, and you have to make some sacrifices. Get rid of unnecessary costs before you consider getting rid of your people.

2. Lower your overhead costs

For many businesses, overhead costs are a major line item. Think hard about how you can reduce your overhead costs or eliminate them for the next few months. Scale back on your marketing budget. Double down on your online marketing efforts. Search for new ways to continue serving your customers during this time.

If you’re a restaurant, consider offering curbside pick-up or delivery services. If you sell products, ramp up your online presence and appeal to your loyal customers. If you sell services, now might be a good time to offer a great deal on gift cards. That way, money will still flow in, and you’ll have a long list of customers ready to contact you when the trouble passes.

3. Consider cutting wages from the top

If you can afford to pay employees before you pay yourself, even at a reduced rate, do it. Ultimately, your financial sacrifice pays off in employee loyalty and your business’s reputation.

4. Apply for a grant or low-interest loan to cover payroll

Consider applying for a small grant or loan to mitigate your revenue losses and carry you through the next few months. Business owners can use these low-interest loans to pay off debts and bills and cover payroll. Facebook even announced they’ll be offering $100 million in cash grants and ad credits for up to 30,000 eligible small businesses.

5. Furlough employees

During a furlough, employers take workers off the payroll, but workers still receive healthcare benefits. In many cases, employees are also eligible to apply for unemployment pay during a furlough.

6. Enforce employee sabbaticals or leaves of absence

Employee sabbaticals can be either unpaid or paid at a much lower rate (i.e., 50% of a worker’s salary). Employees on sabbatical or leaves of absence are still employed by your business and are guaranteed a job when they return.

7. Consider temporary layoffs

An employer may lay off workers temporarily. Typically, during this time, employees do not receive pay or benefits. But they are eligible to apply for unemployment pay. Employees may also qualify for standby. Standby waives the job search requirements while collecting unemployment pay during the approved standby period. Unemployment benefits vary by region, so check with your local government for more information.

8. Ask employees to take sabbaticals or leaves of absence

Let your team know that you’re having major cash flow problems. If any of them have been looking for an opportunity to leave amicably, now is the time. This protects employees who don’t want to leave from a lay off.

When layoff alternatives aren’t an option

There’s a chance that none of these alternatives will work for your employees or your business. If that’s the case, keep your employees’ best interests in mind. Laid-off employees can apply for unemployment pay and other financial benefits to carry them through. Here are a few resources that can help employees recover from a coronavirus-related layoff.

Unemployment help

Learn how to apply for unemployment benefits and access other programs and services that can help if you lose your job.

How to write a financial hardship letter

A financial hardship letter explains your financial situation to your lender, credit card issuer, or bank. They may work with you to create a sustainable payment plan.

How to apply for a personal loan

If you apply for a personal loan online, you can have money in your account in as little as a day.