Two things every company must consider before firing an employee in a coronavirus recession

Two things every company must consider before firing an employee in a coronavirus recession

The US economy is in recession as the COVID-19 crisis deepens. At-risk companies have stepped up measures to reduce costs, including deciding when and when workers should be fired.

The right approach depends mainly on two factors.

First Consideration: When layoffs are on the card, management must consider the level of difficulty faced by the replacement of these workers. The more skills and institutional knowledge employees have, the more challenges companies face in replacing them.

Remember: Recruitment and retention challenges cause even more headaches in the harsh labor market that the US economy has been experiencing just a few weeks ago. Thus, when more optimistic recession scenarios occur [short-term contractions followed by a strong recovery], slack weakens. The tough labor market is resuming, and a war of talent is going on.

Second, management needs to consider the severity and duration of the business downturn. The longer and longer the dip, the more reasons companies start layoffs. How long this recession remains is an open question, but there is no doubt that the coronavirus pandemic is putting millions of jobs at risk. Unemployment can reach double digits by May.

When weighing the actions taken by companies, it is helpful to look at the affected industries through three categories: those that were severely affected, those that were slightly affected, and those that were actually trying to gain some status. You.

Severely impacted: Industry with social distance allergies

The travel, hospitality, and entertainment industries are likely to enter a survival mode. Given the factors that affect these industries, the severity of a business decline is the most acute, and the duration of the decline can be the longest.

Their Achilles heel is a social distance, and civil servants and experts say they can last from months to more than a year. Exacerbate the risk of layoffs: Many, but not all, of these tasks do not require inadequate skills or detailed institutional knowledge. Replacing workers may definitely take time, but doing so is not difficult. Many companies in these industries need to take strict measures to survive.

Moderate impact: victims of a normal recession

In most cases, a recession will harm manufacturing, freight, and advertising companies. However, because social distance is not cryptonite, we can expect a much less serious reduction in business volume than in businesses that require a significant amount of face-to-face work.

Especially in this cohort, management should think twice before giving a pink slip. After all, many employees in these sectors, including manufacturing and transportation workers, were difficult to find. The unemployment rate for these two groups in February was 3.9% and 3.4%, respectively. Employers need to rebuild their workforce, which incurs new recruitment and training costs, and firing workers can increase the path to recovery.

In most cases, reducing employee time is a better solution than avoiding layoffs entirely. For example, in a government-funded work-sharing program, employers reduced employee working hours. To compensate for this reduction, workers receive unemployment benefits in proportion to lost time. More than half of the states already have formal collaborative programs.

Positive Impact: Industries That Can Benefit

Conversely, some companies have actually increased demand in this recession and need to increase their workforce. Food retailers, some healthcare companies, and discount brands may need to hire to meet growing service needs.

Management in these departments should look for suddenly unemployed workers because they were employed in industries that were severely affected. For example, fired workers in hotels and restaurants came at lower prices and were able to move quickly to food retailing. Of course, such switching does not work for all tasks, but they are a start.

There will be more workers available, companies operating in heavily affected areas where the layoffs are a broader figure to gain more benefits. Many areas of Las Vegas and Florida, for example, rely on the hotel and entertainment industries and will soon attract many new job seekers.

Risk is a cycle of self-fulfilling expectations, as pandemics continue without a clear end. The more likely an employer anticipates the severity and duration of the crisis, the more likely it is to lay off workers and cut spending. This reduces business and consumer confidence and exacerbates the crisis.

Hopefully, future recessions will be shorter and less severe than many expect, and many employers will try to keep as many workers as possible.

Gadrebanon is the Vice President of the Labor Commission and heads the Labor Market Institute.

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