Much has been written about the precautions that are necessary for workers returning. Some of these topics include safe distancing, masks, desanitizing, proper ventilation, rotation times for lunches and breaks, etc. I will provide links at the end of this article that gives details for these pertinent points. However, what isn’t being talked about is how companies are going to respond to the economic realities that will occur in August when the landscape changes.
Company Loans and Federal Employee Subsidies
Employees and employers are currently working in an environment that has been enhanced by the Federal Government in the form of loans and employee subsidies. Our group of companies all received the Payment Protection Program (PPP) loans. The application process was delayed as some banks struggled with the loan criteria and others were not prepared for the demand. Nonetheless, we eventually qualified and received a greatly needed infusion of cash. This infusion allowed us to continue business as usual rather than consider drastic cuts in inventory, laying off employees or temporally shuttering operations. We are forecasting demand will be soft in the third quarter so we are anticipating shutting down for an extended period and we will request employees use their vacation time or Paid Time Off (PTO) to offset the need for layoffs. Under the terms and conditions for the loans, we had to maintain our employment levels at pre-covid levels. We will receive forgiveness on the loans if we use all the funds over 8 weeks for payroll, healthcare, utilities, debt and maintain our current employment levels. The loan amounts received were 2.5 times the average payroll for the preceding year. Any employees we laid off, although not many, have received an additional $600 per week in their unemployment benefits due to the coronavirus. The additional $600 per week is for 12 weeks and expires on July 31, 2020. The expiration of the loans and subsidies for unemployed individuals will create an environment where our company and others will respond to matters of employment as they always did prior to the Federal assistance.
Future Business Decisions
We are taking a hard look at the rest of the year and trying to decide how we will reduce our overall cost footprint that includes labor if business continues at reduced levels. We have been operating with a reduced workforce as many of our employees have been calling off for fear of contacting the coronavirus. We have been able to continue paying their health benefits and wages because of the loans. We could have terminated the employees and, for individuals who made no attempt to call in, we have exercised this right. However, we have worked with and will continue to work with those employees who have legitimate fears because they have demonstrated a long-term commitment to our company. Our loans are running out within the next week or two and this will require a different analysis and response on our part unless Congress and the President agree on another stimulus package. Our company and others will take a hard look at our costs and will try to right size where necessary. Employees will need to work as the disincentive for not working will be removed due to the loss of the $600 per paycheck stimulus. The expiration of the PPP provisions and the unemployment subsidies will require us and our employees to operate under normal business conditions. The Federal assistance and the additional unemployment benefits have given us a false narrative and reality. The working conditions and precautions taken in the workplace will remain, but choices made on matters of profit and loss return to normal.
All these changes necessitate a response in which we and other progressive companies will need be more active in how we communicate, engage and address the needs of our employees. We should assume a longer-term view rather than react to the short-term urge to cut employees and the associated costs. Questions that we will need to consider in the following months include:
- How many employees should be retained for current business levels? More importantly how many should be retained to hedge against future upturns in business? Prior to the Coronavirus there was an employee and skills shortage that forced us to spend more time training and developing internal employees. These investments were significant and quickly could be lost if labor becomes the primary factor for reducing costs.
- How many employees will return to work under the current conditions? It may take some skillful communication and assurance from us to convince some employees it is in their best interest to return.
- Will we continue to operate in this new normal and sustain the level of sanitary conditions of what now exists now? We often have short memories and quickly return to old habits. This may not be a choice if OSHA decides to enact rules that govern workplace cleanliness, additional PPE provisions, etc.
- Will current company flexibility and allowances for working from home continue? Many companies, including ours, who never considered a policy of allowing employees the opportunity to work from home will now need to consider this option.
- Will there be a greater acceptance and movement towards the use of virtual technology for meetings, training and collaboration? There have been real benefits obtained in this crisis through the adoption and use of virtual platforms.
How we handle these questions could well determine our level of competitiveness and profitability. Future articles will consider additional questions as the landscape is bound to change and each situation will require a measured and wise approach.