We haven’t seen economic disruption like this since the 2008 financial crash and subsequent Great Recession. Many businesses right now are in survival mode, identifying how to secure their business for the long term.
The good news is that businesses seem better prepared and can respond more effectively this time. The Government’s unprecedented approach in ensuring access to loans so that people don’t lose their homes and that they have income to pay their bills will hopefully keep the economy going. This extraordinary move protects partial income for employees as well as the self-employed.
But the reality is that certain sectors like Retail, Hospitality and Leisure have been hit hard because of the risk of Covid-19 transmission. For Manufacturing, suppliers have struggled to either meet the demand or to get goods through quickly, and some have had to temporarily close their doors.
Therefore, whilst the Government are doing what they can, businesses are still needing to make some difficult adjustments. The difference is that compared to the Great Recession, generally these decisions are viewed as temporary as we can see the light at the end of the tunnel.
So, what are companies doing?
- Pausing on recruitment, unless essential workforce is needed. Reducing or removing temporary or contract staff
- Reassessing cash position, reviewing expenditure and identifying how long they can pay staff for with no incoming revenue/work
- As yet current employee benefits are not up for review, quite the opposite; businesses are looking at hospital & cash plans to provide protection and reassurance. Providing online fitness, nutrition or mindfulness classes to reduce stress
- Pausing on passing dividends payments back to shareholders
- CEO’s, key Executives taking pay and/or total renumeration cut and reducing Boardroom fees, including reducing or pausing incentive plans
- Applying a reduction of hours and changing work patterns to align to the drop in revenue, business activity and adapting to the working from home situation - ths could mean a reduction in overtime and shift payments, but of course, this could increase for some essential roles e.g. supermarket workers
- Pausing or reducing bonus schemes and pausing sales incentive plans (particularly if not selling)
- Freezing pay or at least delaying pay increases for the time being
- Temporarily re-deploying employees e.g. sales roles into operational/logistics where the need is more urgent at the current time
- For work or revenue that has disappeared entirely, utilising furloughing for 3 months and applying for the government salary retention scheme (80% of earnings, capped at £2,500). This will give the business breathing space and could secure roles in the long term (there will be businesses that will pay the 20%, some which cannot and some where they can supplement to aim to keep their employees earnings whole)
- Some essential businesses with key workers have already had a recruitment drive. Some people whether self-employed or employed on furlough leave are taking the opportunity to keep earning and preferring to move to companies that need them
- Looking beyond the next 3 months, companies will need time to recover and build their business back up to pre-Covid-19 levels. This means that they will be doing a lot of planning, reshaping their product/service lines and predicting what staffing levels will be needed and how that might increase over time
I think some countries may have cut too deep too soon, in a short-term effort to control costs. In the United States, more than 10 million people applied for unemployment benefits in the last two weeks of March, and the numbers are expected to keep surging. These high numbers of layoffs/redundancies may impact the country’s ability to restart the economy when the Coronavirus shutdown has passed.
As with the financial crisis, when this is over recruitment will pick up quickly. Companies that have had to press pause will need to make up for lost time and companies that switched operation from their ‘business as usual’ to supporting the fight against Covid-19 directly, will evidently switch back or have a new product line and have some catching up to do.
Unlike 2008, it is felt that these measures are generally being undertaken for a temporary period and there is hope that we are resilient enough to get through this and make for a stronger economy in the long run.
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