March 18, 2020 Employee Management en_US The coronavirus has forced employers around the world to consider laying off their employees in order to save costs. Here are some tips to avoid layoffs. https://quickbooks.intuit.com/cas/dam/IMAGE/A3oDUwzwF/How-to-avoid-employee-layoffs-due-to-the-coronavirus-outbreak_featured.jpg https://quickbooks.intuit.com/r/employee-management/avoid-layoffs-coronavirus/ 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

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. The Small Business Administration is offering disaster assistance loans up to $2 million for small businesses affected by the coronavirus. 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.

On a state level, New York, California, and Washington have committed to offering small businesses encountering cash flow problems financial assistance. And more states are likely to join them. Check with your local 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. 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 state, so check with your state’s labor department 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 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.

This content is for information purposes only, and information provided should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

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Myranda is a content creator and researcher at Intuit. She graduated with an English and journalism degree from Boise State University and currently resides in Boise, Idaho. She’s passionate about dogs, music, and helping small businesses succeed. Read more