COVID-19: To lay-off, or not to lay-off, that is the question

The International Labour Organization estimates that as many as 25 million people could become unemployed, with a loss of workers’ income of as much as USD 3.4 trillion, owing to the effects of COVID-19. However, the more intimidating part is that these numbers may underestimate the magnitude of the impact, and that majority of the workforce in developing countries have no access to unemployment benefits.

In a world where lay-offs are seen as the most obvious solution for cutting costs, some leaders and entrepreneurs are opting for more people-friendly alternatives. Some of the most effective strategies we have seen in recent times are:

1. Ask the employees

Gravity chief executive Dan Price, set a great example when he spent 40 hours talking to his people about the company’s finances and asking for ideas. As a result, every team member declared the amount of pay cut they could accept, enabling the company to get through eight to twelve months, with no layoffs.

2. Exchange workers with other employers.

Despite the size of company, it is possible to try this with success. Large groups can do this within subsidiaries and small firms can do this with partners and vendors.

The host company pays employee salaries and get the use of a skill set that they might not possess for a fixed duration. This approach is replete with benefits like cross pollination of skills, retention of employees and temporary salary bill relief.

3. Working from home

Most professionals whose work enables them to work remotely are currently working from home amidst the pandemic. One striking example is that of US-based tech company Altimetrik, which enabled 100 percent work from home for its global workforce, allowing business continuity during the lockdown.

Experts say that a chunk of organizations are considering work from home as a viable long-term option if regulatory issues can be addressed. In India, this will mean commercial license issues, data protection challenges and infrastructure review.

4. Pay and benefit cuts

On March 19, 2020, Marriott CEO Arne Sorenson released a heartfelt video message for all its associates, giving an update on the company’s economic condition due to COVID-19, along with the announcement that he and Bill Marriott will forego their salary in 2020. He also stated that his executive team will accept a 50 percent pay cut. Among other major industry players opting for pay and benefit cuts are Cummins, FedEx, Disney, MakeMyTrip and The Indian Express.

5. Unpaid vacations

Forced vacation or ‘furlough’ is one of the oldest responses companies take to manage economic conditions. They could be paid or unpaid, depending on the economy and employer’s ability to pay. For example, all 300 employees at 91springboard have been asked to go on leave without pay for April, while Honeywell has requested its employees to opt for two weeks unpaid leave. It is one of the least pleasant measures in times of crisis, but it ensures employability and business continuity at the end of the crisis.

In addition to the above, companies are resorting to some other measures like reducing hours of work, hiring freeze, as well as deferring increments and promotions, to keep afloat. However, the important precursor to ensure stability in times of uncertainty, is to maintain open communication with stakeholders, empower them to choose between available alternatives, and harbour genuine concern for their well-being.

While there are multiple alternatives to lay-offs, it is undeniable that some companies ought to go down that road for survival. Learning from the mistakes made in the past and taking precautionary measures such as controlled hiring, help ease the pain arising out of lay-offs. As someone who survived multiple recessions, David Cote, CEO of Honeywell, reiterates the fact that “there will be a recovery, and we need to be prepared for it.”

Looking for more ideas on how to manage employee cost during Covid -19 crisis? Join our free Zoom Webinar on 13th April 4:00 pm IST where business and HR experts will share insights on compensation strategies during crisis.