How to reduce costs and avoid employee redundancies during COVID-19
Find out how to reduce costs for your business and avoid redundancies in your team during COVID-19 in this 6-point action plan.
4 min read
There’s been a lot of news about job losses during COVID-19. As the UK has practised safe social distancing and pulled back from daily routines, consumer spending has dropped and many small businesses have been forced to close their doors temporarily. Others that have stayed open are struggling to pay their teams.
No business owner wants to let employees go. They are well aware of the financial implications a redundancy could have on their employees, their business, and their reputation. We’ve explored 6 alternatives to employee redundancies some to help you keep your team together.
1. Eliminate non-essential costs
Put team perks on hold. Cancel any unnecessary subscriptions and make savings where you can on everything from marketing costs to office supplies. You’ll be surprised how small adjustments can make a big difference to your cash flow. It may even allow you to hold onto a member of staff, at least on a part-time basis.
2. Lower your overheads
For many businesses, overhead costs are a major outlay. Think hard about how you can reduce your overhead costs 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, take away or delivery services might be the way forward. If you sell products, ramp up your [online presence] (link to the how to set up an online store article) 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 should 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 will pay off in employee loyalty and your business’s reputation. Not to mention the costs of future recruitment.
4. Apply for a grant or low-interest loan to cover payroll
Consider applying for a small grant or loan to carry you through the next few months. The Government are offering small businesses loans of £2,000-50,0000 as part of their Bounce Back scheme and are offering to cover any interest costs or fees for the first 12 months.
Facebook has also announced they’ll be offering $100 million in cash grants and ad credits for up to 30,000 eligible small businesses. Businesses from 30+ countries will be able to apply.
5. Furlough employees
During a furlough, employers take workers off the payroll on a temporary basis. The Government’s Coronavirus Job Retention Scheme lets business owners claim 80% of their employees’ wages, up to £2,500 per month, when they are suspended in this way. They’ll also cover some National Insurance and pension contributions.
6. Explore employee sabbaticals
Employee sabbaticals can be either unpaid or paid at a much lower rate. Employees on sabbatical or leaves of absence are still officially employed by your business and have a guaranteed job when they return.
Be honest with your team if you’re having major cash flow problems. If they are reasonably financially secure some may want to take the opportunity of time off to pursue a creative project or spend time with their families.
When redundancies are your only option
Perhaps none of these ideas will work for your employees or your business. If that’s the case and you have to face the painful decision to let members of your team go, support them by signposting government advice on how to apply for Universal Credit.
We hope you’ve found this article on reducing costs and avoiding redundancies helpful. Our QuickBooks blog covers a wide range of business-related topics designed to help you manage your business.