COVID-19 and Managing Salaries
Posted by on
If you’re not thinking about how to manage salaries during the COVID-19 pandemic, then now is definitely the time to do so. For most companies, payroll is one of the largest, if not the largest, expense. This pandemic presents businesses of all sizes with a unique challenge, namely to determine the best way to handle payroll so as not to negatively impact the business, while simultaneously taking care of employees. After all, your employees are the core of your business and you want them to feel as though you have their backs.
With that stated, however, you must balance the financial health and financial realities of your business with employee morale. Eventually, the COVID-19 pandemic will end, and you’ll need your employees. Determining how to balance these forces during the pandemic could greatly influence how well, and how quickly, your business rebounds after the pandemic is over.
In this article, we’ll explore 5 key strategies for managing salaries during COVID-19, as laid out by David Brown, Founder and CEO of Techstars. In David Brown’s recent Inc. piece entitled, “How to Manage Salaries During COVID-19,” Brown gives readers 5 important strategies for how best to deal with salaries during the uncertainty of the pandemic.
His first piece of advice, “hit pause immediately,” of course, makes a great deal of sense. Brown feels that it is vital to pause everything that isn’t absolutely essential. As he phrased it, “Unless you are making or improving on ventilators, this is not the moment to expand.”
Revenue is Everything
Brown’s second strategy is that “revenue is everything.” Investors and angel investors are drying up. For, as Brown points out, investor personal net worth is taking a beating in the stock market. This means that you need to realize that investment is essentially coming to a halt, and the same holds true for mergers and acquisitions. Now is the time to focus on revenue. Brown wants businessowners to think about how they can insulate themselves from the fallout of COVID-19 as much as possible.
Cut Salaries, But Do So with Care
Salaries are at the forefront of Brown’s thinking. He states, “Cut salaries, but do so with care.” He recommends assembling the leadership team and have everyone put their personal financials “on the table,” so as to assess what everyone needs to make it from month to month. Since leadership salaries are usually the highest, this could serve to free up funds. It is also vital that everyone understands that you are doing everything possible to make cuts and keep the company going so that you don’t have to cut jobs. The fact is that this move is essential for keeping morale as high as possible. Your team members need to see that you care.
Furlough If Necessary
Brown’s fourth strategy is that furloughs are the best of the bad solutions. If some people can temporarily make it without their jobs, then seize this opportunity. Sometimes this is possible if the employee’s partner is still working.
Make Cuts All at Once
Finally, Brown’s fifth strategy is, “When you have to cut, go big.” Lots of small cuts are horrible for morale. Instead, focus on making the necessary cuts all at once and moving on. The remaining employees will feel more secure and will be able to focus better on the job at hand.
Ultimately, you may have no choice but to let employees go, trim parts of your company that are not generating revenue and furlough employees. No doubt, all of this is bad and there is no way around it. However, how you handle payroll could be the difference between bankruptcy and your company making it through this period in time.