Layoffs, Furloughs, and Other Paths to Survive: A Controller’s View

As the economy remains in a constant state of tumult, it’s hard to know if things are heading up, down, or sideways. While some may be confident, others are not so much, meaning that many controllers may have to make tough decisions to keep the business running even as things return to normal.

Could Making Remote Work a bit more Permanent Help You Keep Running?

Though there are many options to keep your busines afloat, a potentially overlooked one may be the most likely to keep morale from bottoming before all options are exhausted. As discussed in an AccountingWEB article, How to Help Clients Conduct Layoffs and Furloughs While Mitigating Their Risk, one option to keep your business afloat might be to rethink this “temporary” work from home push:

“It seems like whenever times are tough for business, payroll is the first area to receive cuts. But given the impact on company morale, not to mention the risk of lawsuits associated with job losses, businesses should at least entertain other ways to reduce costs and retain talent. […]

With so many employees already working from home, for instance, accountants could analyze the potential cost savings of having some or all office employees work from home permanently and bring those analyses to clients. With commercial office leases typically composing anywhere from two to as much as 20 percent of a business’s revenue, there is unquestionably prime opportunity here to reduce expenses.”

Whether this is a complete push or a downsizing initiative, this may be an option to discuss with your outsourced accountant or leadership team before moving to make cuts. Landlords can’t make much from a business that fails, so depending on the flexibility in your commercial real estate, downsizing your office space could help you avoid an immediate move to downsize your staff.

Evaluate the Benefits and Disadvantages of Furloughing

Layoffs are always a touchy subject—which is why some companies have opted to furlough employees. From the legal and HR aspect, it gives you a bit less EEO risk. From the financial perspective, it often helps you reduce costs without adding new ones like severance packages and cash payouts.

However, these also may derail morale even more than layoffs—especially for those employees who are in a constant state of questioning when or if they are coming back.

AccountingWEB notes that companies “who opt for furloughs encourage employees to apply for unemployment benefits on the first day of their temporary leave. This action ensures employees receive the maximum compensation possible. Additionally, employees should be reminded that even those who use up their vacation time or personal time during the furlough may still qualify for unemployment benefits.”

Additionally, you still may be responsible for the employer contribution to health insurance, and costs may pop up.

If All Else Fails: Be Safe and Compliant When Conducting Layoffs

If any and all of the stopgap measures fail to keep your business afloat, move to layoffs. However, running this reduction in force strategy may expose you to increasing risk and other negative effects, according to the AccountingWEB article. From your reputation as an employer to the risk of actual or perceived discrimination, this should be carefully completed. Among the advice from the article:

“To avoid actual or perceived discrimination, businesses should proceed carefully through selection process. A classic approach is last in, first out. But if a company does not have a specified policy like that in place, that does not mean leadership should randomly lay people off or let people they do not like go. […]

Another way to ensure layoffs are conducted on solid, defendable grounding is to align layoff requirements with the company’s goals and vision. Company leaders should thoroughly evaluate the positions and individuals that are unlikely to play a significant role in the company’s future, and layoff those employees first.”

From here, be very careful to stay in compliance with discrimination laws—especially during the tumultuous environment.

Controllers Council: Here to Keep You Up to Date

Layoffs, furloughs, and other reduction in force tactics are stressful for people on both sides of the table, damaging to morale, and occasionally costly—but often, it’s a necessary thing for your company. With an uncertain future at many businesses and cash flow already tight, it’s just one of the many tough choices you need to make to live to fight another day. If you’re looking for more tips and advice on how to keep cash flowing and your business afloat, get to know the Controllers Council.

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