A lot of companies are laying off workers right now – and that’s to be expected. The economy went through its largest peacetime contraction in history last year thanks to the COVID-19 epidemic.
But laying people off and throwing caution to the wind is never a good idea. While getting rid of staff sometimes feels like a short-term fix, it can leave you in a long-term bind – and that’s never what you want.
In this post, we take a look at some of the things you need to consider before laying off employees. Try to avoid a knee-jerk response, no matter how tempting it might seem.
The Economy Will Bounce Back
Thanks to the virus, things seem quite dire right now, especially if you listen to the mainstream news. But when you go digging a little below the surface, you quickly discover that the economy is ticking over more healthily than you might think. Unemployment as a whole is way down from last March. And new types of business – especially the online variety – are responding to the crisis by upscaling their operations.
The economy will bounce back. It always does. And when that happens, you need to be in a position to take advantage of it.
Letting all your employees go to cover your short-term expenses seems to make sense. But thanks to COVID-19 vaccines, humanity could have beaten the disease by the summer, and then where will you be? You’ll have to rehire, and there’s no guarantee you’ll be able to find the talent you need.
Laying People Off Could Be Difficult To Administer
You would think that when you lay people off, you relinquish all the associated admin responsibility. But that’s not true. If you live in a state with unemployment benefits, you have to manage that too. And it can leave you out of pocket.
The best approach here is to use a firm like Unemployment Tracker which uses software to automatically calculate how much money you need to put aside when making people redundant. Outsourcing takes the hassle out of calculating statutory unemployment pay and automatically adjusts, even if you increase employees’ salaries.
You Could Create Bad Blood
Laying people off risks creating bad blood. A lot of your employees have dedicated their lives to your organisation. They want to feel as though they’re valued and not just another statistic on payroll. But if you fire them the moment profits start to dip, they’ll take it personally and may never want to return in the future.
Avoiding making people redundant for as long as you can, therefore, is good practice in business. Sometimes, it is worth hanging onto critical staff on a retainer as you wait for business to pick up again. You may even take the opportunity to temporarily negotiate down their pay before increasing it in the future.
In summary, when entrepreneurs go through a crisis, their immediate reaction is often to fire people to drum up cash. But in short-lived crises like the current one, that might be a false economy.
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