How to Manage Employee Cost during Covid

Identifying and managing the cash flow has been one of the biggest challenges for businesses during the COVID-19 outbreak. They are trying their best to manage optimum workforce and remain functioning.

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How to manage employee cost during the COVID crisis

Businesses are doing their level best to stay afloat, during this ‘test of time’. Lots of deliberations are going on in the discussion rooms on how to identify and manage the optimum workforce, to keep the company functioning. Some companies are having no options but to resort to employee lay-offs and reduction of monthly payments, despite the recent MHA advisories against these measures. News of ‘Golden handshakes’ and lay-offs are floating in almost every business circle.

Are you considering similar measures to optimize your workforce? It might not be as easy as it appears. You should take into account the legal, employment and labour laws associated with such hard decisions when you sit down to implement those. Your decisions should also conform to the provisions mentioned in –

The Payment of Wages (PoW) Act, 1936

  • The individual employment contracts/agreements
  • The SCE Act of the jurisdiction where an employee is engaged or located

It sounds complicated, doesn’t it? But, how about not going into all these at all? How about having some alternate ways of managing employee costs during the COVID-19 crisis, without actually saying ‘goodbye’ to your employees?

Yes, such measures do exist. We will tell you how to go about those!

We recommend you to consider the following measures-

Cut costs, not talent

As an employer, you should take cognizance of the impact of the COVID pandemic on the personal and professional lives of your employees. Reducing costs and retaining talents should be the need of the hour. Rather than resorting to layoffs, you may reduce the working hours in non-critical sections and reduce the pay proportionately. The employees may agree to work even half-time, thinking that it will save their jobs.

Alternatively, you may ask the employees to go on an 'unpaid leave'. This can be done on a rotation basis to ensure operational continuity. As an employer, you should also set an example by cutting down on your ‘C-suite expenses’.

As most businesses have done already, you may decide to discontinue some of your non-core and non-performing units.

Restructure HR policies

Restructure your policies related to employee benefit plans. Make it clear to the employees that your overall objective is to avoid retrenchment. This will make the employees amenable to certain personal sacrifices in the form of halting bonuses, ban on overtime, and other such cost-saving measures.

You may revisit all your open positions and freeze all non-critical hires. Review all your benefits/allowance schemes and restrict your investments in non-core schemes. For example, you can dispense temporarily with travelling or transportation allowances when most of your employees are working from home.

Other possible saving measures may relate to restructuring your appraisal framework until normal conditions are restored. Promotions, salary increase, and performance bonuses may take a back seat in the meantime. You can even cancel some of the non-mandatory bonuses, depending on the impact on your business. You may look to postpone your appraisal cycle if the same is yet to be conducted.

If you are thinking about a salary cut, we would advise you not to opt for a blanket salary cut across the pay bands. Rather, review the existing bands and go for percentage cuts in these bands. Do make sure that the entire process is transparent enough.

Last but not the least, employ the strategy of rightsizing or redeployment; rather than downsizing or retrenchment. This will allow you to structure your workforce and align with your short-term business needs and long-term value. Construct cross-functional teams to maximize the effectiveness of your current as well as future workforce. Try to increase the effectiveness of your performance enhancement plan. Identify the low performers and non-performers and put them to voluntary suppression, rather than termination. They can be brought back to the system at a later date, based on business viability.

Have open communication with the employees

It’s a common belief that employers should not openly admit the company going through turbulent times. Many employers think that such an admission would only scare the best employees away. But, it’s not always true in today’s age. Everyone knows that the economy has been hit hard by the pandemic. Everyone is aware of the increased uncertainty in the business sector and the job sector as well.

Therefore, as an employee, you do not gain much by keeping your cards close to your chest. Rather than keeping the employees confused about their future, you should be more open with them regarding the 'health' of the company. You may share your goals and current priorities with them. Do not communicate vague statements just for the sake of doing so. Be clear and precise with your communication and leave no scope for ambiguity.

It is hard sailing through a downturn and it is even harder to make decisions to keep a business afloat. If you can empathize with your employees, they will join hands to help you weather the storm and come out stronger.

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