As we scramble to rebound from the unexpected consequences of this pandemic, many of us face difficult decisions to make regarding our workforce. Perhaps your company has been forced to close as a non-essential business with no remote work options. Or your client base has been directly impacted, which is now realized in your revenue flow. There are countless problems that this outbreak has caused within the workplace.
So, you think you need to reduce your payroll? Maybe you are feeling guilty because you do not want to layoff any of your staff. Perhaps you even tried to get your hands on some of the elusive disaster assistance monies. Now, you feel backed into a corner and out of options.
Let’s take a deep breath. You do have options, so we are going to try to avoid knee-jerk, emotional reactions. For this article, we are going to evaluate two of those options, furloughs and layoffs. In short, a furlough is a mandatory, temporary, unpaid leave. A layoff is a full separation from the company.
Furlough is an excellent solution if you expect to be able to re-open shortly and want the current team to come back into the same roles when work is available again. You can temporarily dismiss one or more positions within the organization, with the intention of bringing that employee back into their role at the end of a short period of time. Essentially, it allows them to file for unemployment without the requirement to look for work continually. Here in Arizona, we have one of the lowest unemployment payouts in the country, with the weekly maximum sitting at a measly $240 a week. However, with the extra $600 the feds are currently kicking in, it makes a furlough a more viable option. Let’s face it, $840 a week is not fabulous, but it does not suck to have time off (avoid the temptation to ask furloughed employees to work during this time).
Using the furlough option can present many additional complications to consider, many of which surround benefits, so be prepared to dive into your benefits plan language. Additionally, we have to consider minimum salary requirements for exempt employees if the furlough impacts less than a full workweek. We also have to be respectful of the furloughed employee’s mental well-being and check in on them. Communicate regularly about your timelines for re-opening (or not re-opening), so they can plan their financials, child-care, and home projects accordingly. Yes, this takes more planning and touchpoints than a layoff, but it is well worth it if you want to retain your current workforce.
Sometimes, the need arises to layoff a position or the entire workforce. A layoff is usually a permanent reduction in force. If you are unsure whether you will be able to sustain your current workforce or believe your company’s return after the pandemic restrictions are over will be in a significantly reduced capacity, you might consider a layoff. A layoff will allow your staff not only to claim unemployment but also to provide them the opportunity to find work elsewhere. Even with over 26 million people currently unemployed in the US, there are still companies hiring. Layoffs are to be utilized when you do not see the position continuing. However, if you can ramp back up, remember that you should offer the first right of refusal to the employee that you laid off.
Layoffs aren’t a convenient way to take care of performance issues. The layoff is the elimination of position, not the elimination of a person. Allow me to spend a little time explaining this because this issue comes up repeatedly. In our pre-pandemic environment, there have been consequences to hiring a new person into the same role that you recently laid someone off from. Commonly, HR departments have required you to rehire a laid-off employee if you need to fill the same responsibilities within one year after you eliminated a position. Which, I imagine, will be just as strict after the pandemic, maybe even more so. The government does not want to pay unemployment to your bad apple, just because you were too lazy to do due diligence and fire them for a cause. With fewer jobs to go around, I anticipate that former employees with eliminated positions will be more inclined to sue if they find out someone else was hired to replace them post-layoff.
These are only a few of your options and will require more analysis than the quick synopsis above. Any employer considering a furlough or layoff will need to consider state and local laws, federal laws, emergency pandemic declarations, and obligations under the WARN act. Additionally, companies that have received PPP loans need to understand how these decisions can impact their loan.