When it comes to layoffs, for most employers this is (or should be) one of the last options. In our current ever-changing and crazy landscape I wanted to share some ideas and advice around reducing payroll costs, through measures other than traditional layoffs.
Rolling Layoffs
Consider rolling layoffs. For example, have someone work one week on and one week off.
Rules to Remember:
1. For a non-exempt (hourly) employee if he doesn’t have any hours worked, he doesn’t have to be paid.
2. For a salaried exempt employee, he does not have to be paid his salary if he does not perform any work in an entire workweek. But they must perform absolutely no work (no emails, no conference calls etc.)
You can either let employees choose to use PTO or mandate they use PTO to offset any portion of the unpaid week. However, if the goal is to save money, paying out PTO doesn’t save the company any payroll dollars. Also, any money an employee receives from the company is taken into consideration when he applies for unemployment benefits. It can reduce or eliminate unemployment benefits for that week.
Remember there are additional requirements for employers to pay employees on leave due to Coronavirus for a specified period of time under the Families First Coronavirus Response Act (FFCRA.)
Volunteers
I always encourage employers to ask for volunteers for layoffs, either temporary or permanent. If a critical employee volunteers, you can always tell them “thanks for the offer but we can’t spare you.” There may be people in your company willing to be laid off due to their personal circumstances. Before you begin agonizing about who’s names are going to be on your layoff list, solicit volunteers, you may be surprised (and thankful for) who steps forward.
Reducing Employees’ Pay
An alternative to layoffs may be reducing employees’ pay.
Rules to Remember
1. For non-exempt (hourly) employees they must be paid at least minimum wage and any applicable overtime. With proper notice (defined as 24 hours prior to and in writing in NC, and 7 days prior to and in writing in SC) you can reduce your hourly employees’ pay.
2. For exempt (salaried) employees the employer can reduce their salary as well. Salaried exempt employees must be paid on a set guaranteed weekly amount. The minimum salary an exempt employee must be paid is $684 per week. Salary is not something you can change often. If it fluctuates too much, you risk losing the overtime exemption and therefore the ability to pay your employees a salary. If you choose to reduce an employee’s salary, you could accompany the reduction with a reduced work schedule and job expectations (but you aren’t required to.) For example, with an exempt employee, the employee’s pay could be cut by 1/5 and you could also cut them back to four days a week. As an exempt employee the number of hours of work isn’t tied to salary. If he needs to work more hours to get his job done, there is no wage and hour issue.
3. Additionally, you could do an across the board pay reduction. For example, everyone’s pay is reduced by 10%. Another option is for companies to reduce salary on a sliding scale. For example, leadership salaries are reduced by 30%, management and exempt level salaries are reduced by 20% and non-exempt pay is reduced by 10%. All of these are compliant, as long as exempt employees make at least $684 per week on a salary basis and non-exempt employees make the required minimum wage rate and overtime.
Benefits
And finally, contact your 401K carrier and ask about stopping your 401K match during this time. Stop any additional benefits programs that you aren’t contractually obligated to continue. And remember as you’re making these decisions, you need to review your benefits to ensure there aren’t any unintended consequences regarding employees and their coverage.
Final Thoughts
Finally, ask your employees for any suggestions they might have for cost savings. Share with them that the company needs their help to implement cost savings wherever possible, and if they recognize a situation where cost savings could be made to please let you know. They may have some great ideas, and soliciting their input helps them feel involved and invested
Communicating with employees is critical during this time of uncertainty and isolation. Share with your employees that you will strive to keep them informed of the company’s situation and plans, as you continue to work through this downturn of economic activity. Reminding them, everyone must work together as efficiently possible, while maintaining quality.
During this time, you may have additional questions. I’m here to support you, your employees and your business. Everyone stay safe, be well. For more information, insights and advice, email me at Elizabeth@BrackettHR.com and follow me at LinkedIn.
Elizabeth Brackett is a SPHR and SHRM-SCP certified HR professional, with over 25 years of HR experience, including consulting across diverse industries, banking and financial services, manufacturing, retail and service companies. She provides expert advice, counsel and implementation in all areas of HR, crafting HR policies and best practices and ensuring compliance.