How to Save Money and Avoid Layoffs During COVID-19
As the COVID-19 public health pandemic continues, businesses have had to deal with unprecedented disruptions to their operations, cash flows, and workforce stability. Undoubtedly, most employers wish to assist their employees throughout the crisis while still ensuring their businesses survive. However, many are struggling to balance the costs of operation and maintaining their current workforce with shrinking profits.
The result of this balancing act is mass layoffs. Though the action may be inevitable in some cases, senior management has options that they can exhaust first to avoid that outcome—for instance, saving money by re-evaluating their existing employee benefit plans and switching to a new one with better terms.
Sure, a cost-cutting reflex is understandable. Senior management must make responsible decisions to ensure their companies remain afloat. However, those who manage the COVID-19 economic effects compassionately, create value for their organizations and come out of the coronavirus pandemic stronger than ever.
Why Keep Your Employees?
Besides satisfying a reignited demand once things start returning to a semblance of normalcy and maintaining the quality of your company brand, there are other reasons why it’s a good idea to retain your workforce. Companies invest substantial amounts of time and money in training their employees. What’s more, a seasoned workforce possesses a lot of institutional knowledge, such as how systems work, the risks abound, efficient methods of operation, and which tactics have failed or succeeded.
Finally, there are several risks related to layoffs, such as class litigation. Of course, when the business is back on track, you will need a capable workforce to reboot.
So before announcing a round of layoffs, consider the cost-cutting measures discussed below first. For all these options, employers should apply changes consistently across their workforce to avoid claims of discrimination and inequity.
1. Renegotiate Employee Benefits Plans
Negotiating your employee benefits plans to get a favorable renewal rate will be critical this year. You can also choose to switch to another plan for the potential of even more savings. It would help if you understood the inherent inequity in your renewal process and how your size factors into the equation. The truth is that most firms significantly overpay for their employee benefits. As such, switching to another plan or renegotiating for a better renewal rate can save you a lot of money otherwise used up in costs.
As a result, employee benefits specialists are now more important than ever. They can help you navigate these complex environments and renegotiate or switch to another plan.
2. Bill Deferment
Many financial institutions and utility companies offer bill deferment for businesses affected by the coronavirus crisis. You should reach put to see if you qualify for a forbearance. Examples include loans, rent, credit cards, utilities, and suppliers.
3. Eliminate Non-Essential Spending
Strive to operate as lean as possible throughout the coronavirus crisis. That means cutting all your non-essential spending or operations altogether. These may include:
- Leased Equipment: Return or renegotiate payments for all your unused leased equipment such as fleet vehicles.
- Travel: With social distancing and stay-at-home orders, it is pertinent to cut all travel expenses or limit them to only critical business functions.
- Software: Audit your software expenses to identify where to save money. You can also pause or close your account with a SaaS platform if need be.
- Office Space: Try and renegotiate pricing with your landlord or move to more affordable space and negotiate favorable terms. Many landlords are giving concessions on rent in 2020.
4. Reduce Your Payroll Expenses
Payroll is a company’s most significant expense, so it’s only natural that most companies will decide to reduce their payroll expenses, which means mass layoffs. However, others use creative solutions to ensure they keep their employees no matter what. These include:
· Reduce Employee Hours
Place hourly workers on a part-time or reduced-time schedule, and eliminate overtime hours to save costs. If your workforce is unionized, confirm first if they can make these changes unilaterally under their collective bargaining agreement.
· Reduce Compensation
Reduce or eliminate bonuses, commissions, grants, or any other financial incentives.
· Stop Onboarding
Implement a hiring freeze to save costs and withdraw outstanding job offers. However, be careful to avoid discrimination claims when selecting the offers to revoke. For accepted offers, seek legal counsel before rescinding them.
· Reduce Non-Employee Workforce
If you use leased employees or independent contractors, you can terminate any existing arrangement after carefully scrutinizing the contract agreements.
· Employ Voluntary Unpaid Leave
You can encourage some employees to take a voluntary unpaid leave, which you can frame as a career pause or sabbatical.
· Institute Mandatory Unpaid Leaves
Mandatory unpaid leave (furloughs) put employees on a period of unpaid leave even though technically they are still employed. You can also organize for your employees to join other industries that are experiencing increased demand during this period, such as online retail.
Now, Over to You!
Eliminating expenses is a smart option to keep your business afloat during the COVID-19 crisis and its aftermath. However, conventional wisdom dictates to save as much money as possible because you will need it later after the pandemic ends. You should avoid cutting too much of your costs to cripple you later on or lose your market share and reputation along the way.
Before cutting costs, you should first make your cash flow projections to determine how much to save to survive the pandemic and its economic repercussions. Doing so will enable you to make intelligent cost-cutting choices that reduce your expenses and allow you to maintain a presence so that you prepare to resume once the pandemic ends.
At Pioneer, we offer free services that explore all options available for corporate employee benefits plans (such as insurance or 401K) and bring back detailed proposals from different providers. Additionally, we consult on which plan saves you the most money and makes the most sense for your goals.
Due to our established relationships with providers, we can negotiate incredible deals on your behalf and save you up to 30% on what you are currently paying. The best part, this service is entirely free for our clients because our fee comes out of the provider’s pockets only.