We’ve worked so diligently to attract and retain our talented employees. The last thing we want to do is lay them off.
With COVID-19 in play and businesses shut down or working remotely, Companies may be planning for the “what if” scenarios. This is familiar territory for me. I worked with a reputable Wisconsin Company when our U.S. economy crumbled in 2008. We had these same concerns and brainstorming sessions. There are a few options to consider before moving to layoff.
First and foremost, be transparent with your employees.
If this pandemic will cause financial stress for the Company, chances are, employees are willing to be part of the solution instead of losing their jobs. I’m not suggesting you open up your financials! More so, I am suggesting that you share that this pandemic will set your Company back financially for a short time.
Options that Companies may want to consider instead and/or before layoff are:
Voluntarily Unpaid Time Off: Employees may want to volunteer for a week or more of unpaid time off, to help the Company, and to preserve their jobs. Keep in mind, if the employee is salaried, you can only interrupt that salary using whole weeks of unpaid time. It’ll be important that all employees (hourly or salaried) don’t check messages or respond to e-mail/voicemails at this time – they truly need to off of work.
Furloughs: Companies could move employees from full time (40 hours/week) to 32 hours/week to preserve employment and benefit coverage. Companies could experience a 20% savings in wages with this approach. Companies will want to revisit employee’s pay and document the 20% reduction. In terms of salaried employees, you’ll want to be mindful of not changing salaried employee’s salaries frequently, as it can impact the exempt status. Rather, document the reduced salary to reflect the furlough efforts until the Company resumes normal, non-furlough operations.
Reduce Current Employee’s Pay: Consider pay reductions – 10-20% is a good place to start. You may consider having your highest-paid employees take larger pay cuts than those that are paid less. This is because it is likely that your higher-paid employees can better absorb the impact and still maintain their benefit deductions.
If the above options aren’t avenues a Company can accommodate, then we need to explore layoffs. If a Company is considering layoffs, the Company will want to document their reasoning. Companies do not want to include the new laws, EPSLA (Emergency Paid Sick Leave Act) and EFMLA (Extended Family Medical Leave ACT) which go into effect on April 1, 2020, as their reasoning, as it could be a legal issue later.
Rather, reasons for layoffs are reasons like 1) our company must partially or fully* close due to COVID-19, 2) specific positions cannot work remotely, 3) economics due to COVID-19 are causing a risk to the business’s financial health, 4) loss of need for a position due to diminished demand, etc. It can be a combination of all these things. Companies will want to document those before they do any layoffs/reductions in force.
What’s the difference between a lay off and a reduction in force?
A layoff is a temporary separation from payroll. An employee is laid off because there is not enough work for them to perform e.g. the business is fully or partially closed or the position is not currently needed. The Company, however, believes that this condition will change and intends to recall the person when work becomes available again. Employees are typically able to collect unemployment benefits while on an unpaid layoff, and frequently a Company will allow employees to maintain benefits coverage for a defined period of time as an incentive to remain available for recall. Currently, in Wisconsin, most benefits providers are allowing Companies to keep laid-off employee’s benefits in place for 90 days, as long as they continue to receive paid premiums (from the employer only or the employer and employee contributions.)
Whereas a Reduction in Force (RIF) occurs when a position is eliminated without the intention of replacing it and involves a permanent cut in headcount. A layoff is temporary. A layoff can become a Reduction In Force (RIF) if the Company chooses to immediately reduce their workforce – as circumstances can change. A reduction in force occurs by terminating employees or by attrition.
*If you’re a business over 50 employees in Wisconsin, you need to be aware of the WARN Act – https://dwd.wisconsin.gov/dislocatedworker/employer/tools/notice/
If your company finds itself in need of Human Resources assistance, we’re here to help! We offer guidance and tool kits to help Wisconsin employers navigate their workforce planning during COVID-19. Contact us at 608.850.9797 or firstname.lastname@example.org
Disclaimer: This is not intended to be legal advice.
By: Angie Addison, SHRM-CP, PHR