March 18, 2020 Employee Management en_US Business owners are well aware of the financial implications a layoff could have. But many don’t have a choice. Thankfully, there are a few alternatives. How to avoid employee layoffs due to the coronavirus outbreak
Employee Management

How to avoid employee layoffs due to the coronavirus outbreak

By Myranda Mondry March 18, 2020

As Americans practice safe social distancing, 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 that 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.

1. Eliminate extravagant costs

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 overhead costs and expand revenue streams

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.

If you’re in the restaurant industry, 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 sell gift cards. That way, cash can still flow in, and you’ll have a long list of customers ready to spend at your business.

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. Meanwhile, the Small Business Administration (SBA) is offering coronavirus relief assistance. Some states have created relief funds and grant programs for small businesses. So check with your governor’s office for the latest news and updates on state-specific assistance.

Several banks, including Capital One, Citi, and Wells Fargo, have issued statements saying they’re willing to work with customers experiencing financial difficulties. They’re waiving service fees and donating to public relief efforts.

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. Ask employees to take leaves of absence

Employee sabbaticals can be unpaid or paid at a much lower rate (i.e., 50% of a worker’s salary). Businesses still employ workers on leaves of absence and guarantee jobs to workers 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 state, so check with your state’s labor department for more information.

8. Ask employees to leave voluntarily

Let your team know that you’re experiencing cash flow problems. If any of them have been looking for an opportunity to leave amicably, now is the time. This can help employees who don’t want to be laid 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 get a 401(k) loan 

Borrowing from your 401(k) can be a low-interest way to get your hands on some cash quickly.

How to access your IRA funds 

Learn more about the risks and advantages of borrowing from your Roth IRA.

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.

Regulations and guidance from the SBA and the U.S. Department of the Treasury on the PPP are evolving rapidly and the above information may be outdated. Please refer to the latest guidance from SBA and the U.S. Department of the Treasury to confirm current program rules and how they apply to your particular situation.

The funding described is made available to businesses located in the United States of America and are not available in other locations. 

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Myranda Mondry

Senior Content Creator

Myranda Mondry is a senior content creator for the QuickBooks Resource Center. Her work has been published in Forbes, The Huffington Post, and other top-tier publications. Myranda currently resides in Boise, Idaho, where she runs an Etsy shop selling handmade heirloom quilts. She’s passionate about her dogs, '80s rock music, and helping small businesses succeed. Read more