As cities and states across the nation implement business closures and "shelter in place" mandates for coronavirus, countless small businesses are facing an unthinkable reality: They can't afford to pay their staff until they're allowed to reopen their doors.
"We've seen the situation before where government employees have been furloughed, but large numbers of private companies are now having to look for ways to survive the current economic downturn and protect their long-term viability," said Sue Andrews, a human resources and business consultant for KIS Finance. "For many this means dramatically cutting staffing overheads, with no idea of exactly how long it will be before they will be able to bring their employees back to work."
This is a difficult and likely heart-wrenching decision for business owners. Luckily, the newly passed CARES Act contains a provision that allows businesses to take out loans to cover payroll can be converted to a grant. For more on those loans, see our full story here.
If you find that you end up having to furlough staff after all, there are ways to handle the situation properly and survive it. Here are some steps to take if you are forced to cut back your staff during the coronavirus outbreak.
[Read: 5 Ways to Retain Your Customers During the Coronavirus Outbreak]
Come up with a plan
If your business is forced to shut down entirely, it may be inevitable that you need to lay off your entire staff. However, if you are able to continue operating but simply need to scale back, it may be wise to design an "on-off" furlough plan so your employees are not completely without income for months on end.
"Employers should strive to design a furlough plan that provides the smallest possible disruption to the workforce while still meeting the company's needs," said Jie "Jasmine" Feng, an assistant professor at Rutgers University School of Management and Labor Relations. "For example, instead of a three-month furlough … [give] workers a one-week-on, one-week-off schedule for six months. The cost would be the same, and it could help to lessen the financial burden on employees and sustain their morale."
Staff need to feel that they still matter to the company and haven't just been abandoned or forgotten about.
Sue Andrews, human resources and business consultant, KIS Finance
Coronavirus Guide for Small Businesses
CO— is working to bring you the best resources and information to help you navigate this challenging time. Read on for our complete coronavirus coverage.
Be honest and transparent with your staff
While your employees may be expecting cutbacks, they may be feeling nervous about how layoff decisions are being made. Feng advised employers to clearly communicate that the furlough is not caused by mismanagement of the company or underperformance by the employee.
"This may seem obvious during the outbreak, but it's important to provide that reassurance," she added.
Andrews agreed, noting that employers should emphasize that they've carefully explored all options and there is no alternative to a furlough. You may even wish to share sales numbers to help your staff put things into context.
"It will obviously be a very worrying time for staff, [but] if they know that the decision is designed to be temporary and a way to keep the business afloat, they're more likely to understand and accept the situation," said Andrews.
Provide clarity around benefits
Now more than ever, having access to proper health care is of the utmost importance. Employees who receive health benefits from your company will want to understand how a furlough will impact their insurance coverage.
"It's important to be clear what benefits will remain in place during the furlough," Andrews told CO—. "Pay may be suspended but possibly health care benefits may remain in place. Staff need to … know exactly what the situation will be for them, so providing clarity as soon as possible is essential."
[Read: 5 Ways to Calm Coronavirus Fears Among Your Employees]
Do not allow for work-related emails and calls during the furlough
If your employees regularly communicate with customers and clients, make it clear that they cannot do so while they are laid off, to avoid any legal claims of unpaid work.
"A temporary unpaid furlough is fine, but it's important to ensure that staff don't then undertake any work while they are off," said Andrews. "If staff are still responding to emails or responding to phone calls, they could claim that they are still working. Inform employees that work is not authorized during the furlough."
Stay in touch and provide mental and emotional support
While you can't ask an employee to handle work-related situations while they are laid off, you can and should keep the lines of communication open if they have questions and provide updates on your business's evolving situation.
"Employers should provide psychological support, show empathy, be responsive and regularly check in with the furloughed employees," Feng said. "Effective communication helps to motivate the furloughed employees and retain the good performers."
"Staff need to feel that they still matter to the company and haven't just been abandoned or forgotten about," Andrews added. "Make your communications personal to each individual. This will be far more valuable than a simple generic message sent to everyone and well worth the time that it takes."
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