How to Handle Layoffs Caused By COVID-19
In only a few weeks, the coronavirus has brought the longest economic expansion in American history to a screeching halt, sent the stock market into a tailspin, and triggered staggering job losses around the world. Countless businesses have closed their doors, and those that haven’t are struggling to navigate a rewritten and rapidly changing economic landscape. No one knows what’s next, but more layoffs seem inevitable.
If your organization decides to lay off employees due to the economic effects of COVID-19, your human resources team can partner with leaders to help them make difficult decisions wisely. Equally important, HR can help each of your employees as they grapple with the effects those decisions will have on them.
We asked Cassie Whitlock, director of human resources at BambooHR, to share her thoughts on how to best approach the difficult decision to lay off employees. Cassie begins with an important suggestion about the big picture: “Be mindful of more than just the numbers side of things. Think about your employer brand and recognize that the way you implement these decisions will have a lasting impact on those who leave and those who stay.”
Before going ahead with layoffs, consider a fundamental question:
Are Your Layoffs Necessary?
When sales and revenue suddenly fall off a cliff, leaders may feel an urgent need to cut overhead, and cutting labor costs is tempting because those costs are a substantial expense. But how should your firm do this? Layoffs aren’t the only way, and they are not always the best way. During COVID-19, HR can help decision-makers consider whether less dramatic measures might be more suitable for managing what is hopefully a short-term situation.
Different solutions may work best for organizations in different circumstances. Here are three of the most common options.
Alternatives to Layoffs
Employees are often willing to cut their own pay in order to save jobs. To win employee support for pay reductions, make sure employees know that preventing layoffs is the goal, the reductions are expected to be temporary, and leaders are reducing their own salaries, too. If your firm considers reducing pay by a certain percentage across the board, also consider whether lower-paid employees should have smaller percentage reductions, so they will still take home enough money to get by.
Reduced Work Schedules
Having employees work fewer hours or days can keep pay rates intact while saving money and jobs. HR may be able to offer insights about which employees or teams could do this without compromising essential tasks and goals.
For some workers, a furlough of one or two months may be preferable to losing their position permanently. If employees are assured that their job will be waiting for them afterward, some may volunteer to be furloughed—especially if you promise that healthcare insurance and other benefits will continue uninterrupted.
Whether your firm chooses layoffs or one of these alternatives, Cassie stresses how important it is to be fair and transparent as you proceed. “Establish clear criteria for how you choose who stays and who goes,” she explains. “Be willing to share your reasoning with employees. You want to be known as a company that did the best they could under difficult circumstances.”
HR can help leaders know the key points that need to be communicated about your firm’s downsizing strategy, so employees can understand and support it.
Making Layoff Decisions
If employees must be laid off and saving money is the goal, it might seem simplest to lay off the highest-paid individuals—but Cassie warned that could leave crippling gaps. “Make sure the right people stay with the organization. …[Besides considering their salary,] measure other impacts like loss of proprietary knowledge, influence, and the ability to motivate the rest of the team.”
Choosing the right people to lay off is a lot like choosing who to hire. “Just as you evaluate the entirety of a candidate during the hiring process,” she advises, “layoffs need to be done with a focus on all of the essential functions, hard and soft skills, and knowledge that are necessary for your company to achieve continued success.” Keeping key players and top performers helps ensure that your organization will be poised to rebound as economic conditions improve.
How to Deliver the News of a Layoff to Your Organization
Ideally, delivering the bad news during COVID-19 should follow the best practices for layoffs at any other time: each person has an individual and private meeting with their manager and an HR representative, with the details provided in writing. However, factors like company size—not to mention COVID-19 health protocols like social distancing—may make face-to-face meetings impossible. Ditto for businesses whose temporary shutdowns suddenly become permanent, leaving the workplace shuttered and employees in limbo.
Take into account your organization’s structure, and consider the best way to communicate the news in a way that minimizes as much stress as possible. Maybe that means individual meetings (or video calls) if your company is small enough. Or maybe it means informing managers ahead of time and having them conduct short-notice meetings with their teams all at the same time, with exit interviews throughout the rest of the day. The kinds of situations you want to avoid are those in which employees are left to wait around and wonder whether they are going to be laid off—which is why informing the whole organization ahead of time, as well-intentioned as it may be, might be the wrong way to go.
The bottom line is, do the best you can under your circumstances. Even if you have no alternative but to resort to a group layoff on Zoom or a phone call in the days following your closure, personally explain what’s happening and why, and offer as much assistance to laid-off employees as you can.
Helping Employees Who Are Laid Off
Losing a job isn’t easy in the best of times, and it’s even harder right now when your employees are already coping with so much. They are dealing with the stress and uncertainty of the COVID-19 pandemic. Their everyday routines have been disrupted as they shelter in place. They may have had to suddenly adjust to working from home, and parents have had to learn how to home-school their children. The list goes on. How can HR help those who must be laid off?
“I can think of two main areas to focus on,” says Cassie. “First, how can you be as humane as possible during a difficult transition? And second, what outplacement services can you offer?”
Showing empathy and respect are the most obvious ways you can treat employees humanely. That may include listening to individuals who want to talk, expressing understanding and concern for their wellbeing, and helping them to have confidence in their ability to find a new job.
Cassie suggests it also helps to be transparent as layoff decisions are made. “Give people as much notice as possible,” she recommends, noting that this is for companies that can inform employees of a layoff event ahead of time. “You’d hate for someone to miss an open job opportunity because they didn’t know about it a week earlier.”
As for helping with outplacement, there are several steps HR can take. “Whether you have a budget for outsourced services or it’s all in-house, offer support to help your people get a new job, including resume and interview coaching, letters of recommendation, and reaching out yourself to local employers who may be hiring,” Cassie explains.
It’s also important for HR to be prepared to answer the nuts-and-bolts questions employees may have about their departure—and to provide the answers even if they don’t ask. Harvard Business Review names seven critical questions you should prepare for in advance:
- When will I receive my last paycheck? Will I get paid for my unused vacation time?
- Will I receive severance pay?
- How long will I have to exercise my stock options?
- Is the company offering healthcare coverage after my last day of work, and for how long?
- Will you provide a reference for me?
- How can I get copies of my performance reviews?
- What will happen to my 401(k) retirement account?
Finally, don’t forget the power of kindness to help soften the blow. As you speak with laid-off employees, assure them that their layoff had nothing to do with their performance. If being rehired is a strong possibility, it’s okay to carefully express your desire to see them return, but be clear that you can’t promise anything. And when it’s time for their final exit, sincerely thank them for their service.
Helping Your Remaining Employees
The people who didn’t get laid off need special attention, too. They may feel shell-shocked by the downsizing, overwhelmed by a heavier workload, and worried about future layoffs. “Plan on seeing productivity drop,” warns Cassie. “That’s natural. Whenever hard times hit, we tend to ruminate and lose focus.”
What can help? Cassie continues, “Double down on communication and make sure it is a two-way channel. Communicate from the top, but don’t do it blindly without knowing what people on the front lines are worried about.” That means listening to your employees’ concerns before you speak, instead of assuming you know what they want to hear.
Employees generally appreciate the chance to be heard, and there are many ways for employers to give them the opportunity. For example, Gallup offers a simple five-question pulse survey that gathers employee feedback designed to help leaders foster greater trust, compassion, stability, and hope.
After a layoff, remaining employees will be hungry for honest information about what’s happening, what’s expected in the future, and how the company is working to meet its challenges. HR can help leaders speak directly to employees in company meetings, team meetings, and one-on-ones, using appropriate technology platforms until in-person meetings can safely be resumed.
Preparing for the Future
Moody’s Analytics has estimated more than half of all jobs in the United States economy are at high or medium risk due to COVID-19. That means even if your organization hasn’t laid off workers yet, now is the time for HR to prepare for it just in case.
The organizations that successfully meet the challenges of COVID-19 will be the ones where everyone pulls together. “Now, more than ever,” Cassie stresses, “we see the importance of HR professionals partnering with management to make decisions that will ensure the health of both the company and its employees.”