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.
Learn how to apply for unemployment benefits and access other programs and services that can help if you lose your job.
Borrowing from your 401(k) can be a low-interest way to get your hands on some cash quickly.
Learn more about the risks and advantages of borrowing from your Roth IRA.
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.
If you apply for a personal loan online, you can have money in your account in as little as a day.
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