Leaders Need to Listen to the Brain to Engage Employees in Uncertain Times

Plenty of ink has been spilled and Zoom bandwidth occupied over the past few months with ideas about how to keep employees safe and productive during the pandemic. Most of the information out there, however, has been largely built on traditional business concepts and principles, when the notion of employee engagement may in fact be better served in the same way that other aspects of this crisis have been – by listening to the science.

That’s the angle that E3 Solutions CEO and past IPA PRIME Symposium keynote speaker Don Rheem took in his recent IPA webinar “Engaging Employees in Uncertain Times.”

Rheem says the stresses and isolation brought on by the pandemic will have a serious impact on employee engagement, which Rheem defines as an employee’s willingness to freely give discretionary effort. In other words, the less engaged someone is, the less likely he or she is to go above and beyond; employees may manage to remain productive throughout this crisis, but they’re unlikely to excel.

Why? Rheem says it’s because humans inherently feel safer in groups – with the work tribe being one of the most common. Without a sense of team and togetherness that they get in communal office settings, employees are less likely to have confidence and may not perform at their very best – particularly when many may be grappling with the mental health effects of the current situation, such as unfamiliar remote work, isolation, family stressors, time management challenges and more.

Leaders and frontline managers can help, Rheem believes, by being as consistent and predictable as possible, since these, according to Rheem are two of the most important needs employees look for to feel secure. Consistency should take the form of more validation and recognition, while predictability is best demonstrated through a greater emphasis on ongoing feedback and support. This is where frontline managers need to excel, since 70% of employee engagement is related to an employee’s direct manager/report.

Rheem believes the importance of emotion cannot be understated during this pandemic, or any crisis, since emotion serves as the internal GPS in human beings, guiding actions, behaviors and thoughts. As the COVID-19 crisis slowly pans out, he says it’s critical for leaders to acknowledge the stress employees may be feeling and to not dismiss the very real sense of fear that they may be experiencing.

Some important messages to convey during this, and any crisis include continued reassurance, encouragement, connections, clarity and consistency. Supportive leaders can demonstrate these qualities by being inquisitive listeners through conversational support, while also offering the tactical support of real-world solutions like family care, technological resources, home office assistance and work reallocation. The result will be employees will feel supported, heard and secure – and will be more engaged as a result.

“The future of work will be determined more by how it feels than what it pays,” Rheem says.

MPs Take Slow, Safe Approach to Reopening Offices With Dozens of Data Points to Consider

As firm professionals have adjusted – first to the shock of the pandemic and then to working from home – another anxiety-ridden shift is beginning as states slowly allow returning to work.

Firm leaders interviewed by IPA are in no rush to unlock the doors. They are giving staff the option to come back when they are comfortable to do so, while weighing the risks of reopening and consulting guidance from numerous sources: their own HR experts, legal counsel, and state and federal health officials. Some are contacting vendors to conduct temperature checks, hiring sanitation crews and planning for social-distancing safeguards that were unimaginable even a few months ago.

Here are some of their comments:

  • A survey of staff by Miami-based MBAF, an IPA 100 firm, shows close to half are so concerned about their health that they want to continue to work from home at least through the summer. To avoid staff from working too close together when the office reopens, about 40% of the 30,000 square feet will have to remain unoccupied, says MP Tony Argiz.
  • Lou Grassi, MP of New York-based Grassi, says the IPA 100 firm won’t push employees to come back to the office immediately. Staff were invited to return starting June 15, with plans to sanitize offices weekly and implement six-foot distancing and other precautions. Grassi says staff will be encouraged to give feedback. “If there’s something about this that doesn’t make sense, we need to know.”
  • At Atlanta-based Aprio, an IPA 100 firm, Larry Sheftel, vice president of human resources, says the firm has contacted vendors about on-site temperature checks, and he expects far more remote working than pre-pandemic times. He says firm leaders are well aware that many staff will likely feel nervous about coming back. “Things may not really approach normal until the fall.”

Remote work under an extended lockdown has its own stresses and many will welcome their cubicle like an old friend, but even so, employees who walked out the door in March are different people now.

Todd Nordstrom, author, public speaker and coach, writes that some will be fearful of their health; some will be grateful for the care and concern they’ve been shown; some will be raring to move forward; others will be thinking that work isn’t as important as they once believed.

“We must realize that we don’t yet understand the emotional impact this pandemic has created in the hearts and minds of employees. And, we’ll never know unless we ask,” Nordstrom says in Forbes magazine.

Here are some of the considerations, compiled from legal and business publications:

  • Remember that at a bare minimum, follow guidance from the Centers for Disease Control, World Health Organization, Occupational Safety and Health Administration, and state and local governments. Rules are constantly changing and may not be consistent.
  • Create a re-entry task force to write interim policies until the pandemic is over, including disciplinary actions for violations of policies, including frequent hand washing, sanitizing frequently touched surfaces, wearing masks, maintaining social distancing and the like. Even-handed, consistent and thoughtful are the watchwords here. Don’t wing it, the National Law Review
  • Ask employees whether they have been exposed, have a sick person at home, or are experiencing COVID-19 symptoms, such as cough, shortness of breath, chills, muscle pain, sore throat, or loss of taste and smell.
  • Supply paper towels instead of hand dryers because the jets can disperse virus particles, the Harvard Business Review reported. Disable water fountains and ice machines. Close common areas altogether rather than enforce social distancing.
  • Make a plan for notifying employees if they have been in contact (within 6 feet) of a coworker who has tested positive. Attorneys say the infected staffer should not be named; otherwise employers are in violation of federal privacy laws.
  • Think about how to approach concerns from employees about actions of their coworkers who congregate in crowds outside work.
  • Review time-off policies, including sick leave, and revamp business continuity plans to deal with the next crisis.

“It will be a fragile environment, so you want to be really deliberate and consistent in how you approach things,” says Kent Lambert, managing shareholder in the New Orleans office of Baker Donelson, on the legal news website Lexology.com. “Try to be responsible and fair and even-handed and put safety first. If you approach things in that way, you’ll be in good shape.

Other resources:

IPA Pulse Survey: Compensation, Cuts and the Crisis

IPA’s latest pulse survey tapped the knowledge of nearly 150 MPs in late May on several key issues related to the COVID-19 pandemic.

One of the topics of the pulse survey covered staffing and compensation and what moves, if any, firms had made (or were planning to make) with respect to layoffs, pay cuts and/or partner draws. And while many firms indicated they planned to hold steady in these areas, others were clearly taking action to stem some of the current or anticipated economic repercussions of the pandemic.

For example, only 5% of survey respondents indicated they had instituted across-the-board staff pay reductions as a direct result of the crisis – though the percentage was much higher among firms above $125 million. Meanwhile, 19% of firms had made pandemic-related layoffs (the percentage increased to 43% for firms between $75 and $125 million, and 31% for those above $125 million), but these cuts amounted to less than 10% of the staff for 90% of those respondents making cuts. And while the split among all respondents on partner draw reductions and/or adjustments to partner compensation schedules was right around 50-50, firms above $40 million were far more likely to have taken this route.

In terms of what lies ahead, most MPs seemed optimistic (at least back in late May) that they wouldn’t need to impose pay cuts or layoffs in the coming months, though the outlook among respondents in the $40-$75 million range wasn’t nearly as positive, with 47% in this group saying the possibility was either very likely or somewhat likely.   Catch up on more insights from this IPA Pulse Survey:

Shrinking the Physical Office Footprint

An Interesting Interlude for Internships

A ‘New Normal’ at the Office

Hiring on Hold?

Report: Women Twice as Likely Than Men to Leave Employer Within a Year Following Pandemic

New research conducted by the WerkLabs division of the Chicago-based The Mom Project reveals the negative effects of the coronavirus pandemic on employees – particularly women and working moms.

In a recent survey of approximately 2,000 professionals across the country, women reported they are twice as likely than their male counterparts to leave their employer in a year’s time due to their workplace experience during the pandemic. That number is deeply connected to workplace satisfaction during the pandemic, with women scoring an average of 15 points lower than men on all drivers, meaning their work experience was more negative.

The impact of COVID-19 continues to hit many working moms, who are trying to juggle day-to-day lives and childcare on top of their careers. The economic impact of working moms’ coronavirus-related anxiety is estimated at $341 billion. Not only are women and working moms balancing a plethora of responsibilities, they are also fearing for their jobs – approximately 60% of the jobs eliminated in the first wave of pandemic-induced layoffs were held by women.

Of the professionals surveyed, more than one-third (38%) reported both their work and well-being have been impacted by the coronavirus pandemic. Many participants who volunteered to offer more information on how the pandemic has impacted them and/or their work experience note that leadership believes because social activities are lessened or nonexistent as a result of the pandemic, the employee has more time for work and thus can handle a larger workload – regardless of work-life balance or other responsibilities like child care.

With the lines between parenthood and career blurred indefinitely as a result of the pandemic and various shelter-in-place and stay-at-home orders and mandates, parents need greater support now more than ever. More than 50% of working parents are currently without childcare, and 1 in 5 working parents said either they or their partner are considering leaving the workforce to care for their children.

Full-time working mothers in two-parent households average 22 hours of childcare per week during the current climate while maintaining their jobs. Married men provide an average of 7.2 hours of childcare per week compared to 10.3 hours for married women, among those employed full-time.

“The pandemic has forced an unprecedented rapid shift in workplace culture and it’s important we understand and address the positives and negatives of this change because this may be the ‘new normal’ moving forward, or at least for an indefinite time,” says WerkLabs president Dr. Pamela Cohen.

Survey Reveals Some of the Challenges of Working Remotely

In a recent IPA Pulse Survey, 41% of respondents noted that it is either very or somewhat likely that more than half of their staff will continue working remotely for the foreseeable future.

It seems, in other words, that many firms have found that the technological and logistical challenges that accompanied the sudden shift to working from home at the outset of the COVID-19 pandemic have mostly been met and overcome. But it’s also possible that firms are just trying to make the best of what remains a somewhat problematic situation.

Igloo Software, a digital workplace intranet solutions provider, recently conducted a survey about remote working that gauged the thoughts of 255 professionals working in the finance and accounting departments of their organizations, 29% of whom did not work remotely in any capacity in their current position and 81% of whom expected working from home to present challenges they never experienced when working in the office.

The survey’s findings show that some of those challenges have indeed manifested themselves as the pandemic forced companies to fully embrace remote work, many of them stemming from technology issues, including:

  • 37% of financial professionals couldn’t access important documents or information remotely
  • 47% reported having lost a piece of company technology or having had it stolen
  • 58% have been overwhelmed by the amount of non-work-related messages sent by co-workers in a work-related communication tool while working remotely
  • 65% are using communication/collaboration applications that are not approved by their company, generally because they either save time or are easier to use than company-approved options

While several of the above issues might arise for in-office workers as well, it’s clear that firms looking to move to a more remote workforce will have some kinks to work out in order to make sure things keep running smoothly in the weeks and months to come.

IPA Pulse Survey: Hiring on Hold?

IPA’s latest pulse survey tapped the knowledge of nearly 150 MPs in late May on several key issues related to the COVID-19 pandemic. For example, given the disruption that many firms have endured and the uncertainty that lies ahead, we were interested in how firms are altering their hiring plans (if at all) for the remainder of 2020.

Among all respondents, more than half (51%) aren’t letting the pandemic interfere with their hiring plans. Some, however, are either pushing back start dates for new hires (17% of all respondents, but more than 50% of firms over $125 million) or putting a freeze on new hires altogether for the time being (24% of all respondents, but more than 40% of firms in the $75-$125 million range).

Other firms, meanwhile, are playing offense when it comes to hiring amid the ongoing crisis, with about one in five of all respondents planning to ramp up hiring. This aggressive stance is most prevalent among firms in the $75-$125 million range, where 57% of respondents are not letting the pandemic derail their quest for new talent.

Catch up on more insights from this IPA Pulse Survey:

Shrinking the Physical Office Footprint

An Interesting Interlude for Internships

A ‘New Normal’ at the Office

Updated June 15, 2020: Focus on Rebuilding Revenues in Latest PwC CFO Survey

The new installment of a biweekly survey from Big 4 firm PwC gathered the input of 330 finance leaders ending the week of June 8, just as most states were more fully reopening their economies, several potential flare-ups of new COVID-19 cases were threatening to emerge and the U.S. economy officially entered a largely expected period of recession. Against this backdrop, CFOs expressed optimism about being able to start rebuilding revenues, even while acknowledging long-term concerns about what the “new normal” is going to look like.

Worries about a new wave of COVID-19 infections top the list of threats to business recoveries and the financial impacts of the pandemic. Liquidity and capital resources were prominent on that list, but only 42% of CFOs said it was a top concern in this survey, versus 75% in April.

Getting Back on Track

Nearly half (47%) of respondents expect revenue declines of more than 10% this year, but only 13% of CFOs are now looking at declines of more than 25% – a drop from 20% expecting such steep declines five weeks ago. And 11% are now starting to see prospects for revenue and/or profit growth in 2020 as the economy reopens.

Survey respondents noted multiple potential paths to grow their top-line revenues, with 63% of CFOs planning changes to products and services and 41% looking to alter pricing, among other revenue strategies. Meanwhile, as they look to reinvent their businesses, nearly one-third of CFOs (32%) will be focusing on tech-driven products and services.

Returning to the Office Amid a Second Wave?

With a potential resurgence of the outbreak looming, 59% of CFOs worry about a rise in COVID-19 infections affecting returns to work. Nevertheless, most are very confident their company can both provide a safe working environment (71%) and meet customers’ safety expectations (80%). Of course, their staff may have a different view of the situation back at the office, considering that only 47% of employees in a separate PwC workforce pulse survey said changing workplace safety measures – such a face masks, temperature checks and socially distanced work areas – will make them more comfortable returning to the office.

Given this lack of consensus – and considering the relative productivity of remote working for many companies over the past few months – 54% of CFOs are planning to make remote work a permanent option. Meanwhile, fewer leaders anticipate more furloughs (30%, down 6% from the previous survey) or layoffs (24%, down 7% from the previous survey) in the next month, a trend consistent with the slowing number of people filing for unemployment.

 

Updated May 11, 2020: CFOs Forecast Lasting Changes in Latest PwC Survey

The latest CFO survey from Big 4 firm PwC largely reflects the developing general consensus as to how the country will eventually emerge from the COVID-19 pandemic – slowly, cautiously and with eye toward structural and behavioral changes that may very well turn out to be permanent.

The new installment of PwC’s biweekly survey canvassed 288 finance leaders during the period of May 4-6, when an increasing number of states were loosening stay-at-home orders, cases were still on the rise in many areas and unemployment continued its steady upward trajectory. More CFOs agree that the path going forward is going to be a long one. For the first time, more than half expect their company to take at least three months to recover once the virus recedes.

That said, as they approach some new version of normal, two-thirds of respondents are “very confident” their company can create a safe workplace (even if employees aren’t as sure), 68% believe that crisis-driven transitions to remote work will make their company better in the long run and fewer are considering pushing back or canceling planned investments (58%, down from 70% two weeks ago).

Managing Change

Companies seem to be getting a better handle on conducting business in a transformed environment, with concerns over productivity losses due to remote working conditions declining. In fact, 44% of respondents say they’re finding new ways to serve customers, with many noting that social technologies routinely used in our private lives are now being absorbed into operational planning in the workplace. Despite these silver linings, however, 55% still expect their company to suffer a decline of 10% or greater in revenue and/or profits for this year, a slight uptick from two weeks ago.

Cost Containment

Even as costs remain under scrutiny for almost every company, many CFOs believe they’ve done what they can and will wait to see how things develop before making additional cuts. In addition to the aforementioned optimism toward pullback on planned investments, fewer respondents anticipate furloughs over the next month – 36% in the current survey versus 44% two weeks ago. Further, 34% say they are “very confident” their companies are identifying new revenue opportunities – a number PwC believes will increase as demand becomes clearer.

Heading Back

As they ponder what a return to the office may look like, CFOs are getting more concrete about how their companies will prepare, as evidenced by rising numbers since the last survey in three of the top areas of expected change – reconfiguring work sites to promote physical distancing, changing workplace safety measures/requirements and changing shifts or alternating crews to reduce exposure. Even so, a separate PwC survey of 468 employees found that 51% who have been forced to stop working or forced to work remotely say the fear of getting sick would prevent them from returning to the workplace if their employer requested it tomorrow. In other words, no matter what protective measures companies put in place, they’ll likely still have to sell the idea of a return to the office to a worried and skeptical workforce.

“The shutdowns showed many companies that they can work virtually better than they thought,” the study concludes. “These leaders are seeing the results of being able to move quickly and decisively during a crisis, even while away from the office, and they’re making connections to the longer-term health of their companies. Ultimately, however, the longevity and success of remote work will be driven by the opportunities businesses create for employees to interact, learn and be part of a community. For some organizations, culture also drives innovation and can deliver higher returns, outweighing the costs of on-site work.”

 

Updated April 28, 2020: CFOs Weigh the Risks of Reopening and the Potential Economic Impacts in Latest PwC Survey

As the country begins contemplating when and how to restart the economy amid the ongoing COVID-19 pandemic, the latest CFO survey from Big 4 firm PwC published on April 28 shows the level of concern among corporate leaders holding steady.

The new installment of PwC’s biweekly survey series took the pulse of 305 finance leaders for the push-pull week of April 20, as coronavirus cases in many states had started to level off, several stay-at-home orders were further extended and plans for reopening certain businesses began to take shape. Against this backdrop, 72% of respondents continue to believe COVID-19 has the potential for “significant impact” to their business operations, down only slightly from 74% two weeks prior. What has emerged in recent weeks, however, are more serious discussions about companies returning to some semblance of pre-lockdown operations.

“U.S. finance leaders are focused on shoring up financial positions, as U.S. businesses head into a period of even more operational complexity while they orchestrate a safe return to the workplace,” according to the study. “Back-to-work playbooks put workforce health first, as companies set course for a phased-in return to the workplace that will not be uniform across the U.S. or internationally. Returning employees and customers are going to experience a work environment that will differ in marked ways as a result.”

To illustrate the potential changes that lie ahead, 49% of respondents say remote work is here to stay for some roles, as companies shift to alternate staffing and reconfigured worksites that promote social distancing. Meanwhile, 77% of surveyed CFOs expect to see new safety measures like testing put into place, and 50% are planning on higher demand for enhanced sick leave and other policy protections for employees.

But companies are also beginning to realize that the business recovery from the impacts of the virus will take longer. As measures of manufacturing and service activities continue to drop and demand continues to shift, 48% of CFOs believe it will take at least three months to return to normal, up from 39% in the previous survey.

In terms of the financial fallout they expect from the pandemic, 53% of respondents are projecting a decline of at least 10% in company revenue and/or profit this year. And as cost pressures intensify, 32% of these CFOs expect layoffs to occur (up from 26% two weeks ago) and 70% are considering deferring or canceling planned investments, mostly in the areas of facilities and general capital expenditures, but not as much in investment programs considered important to future growth such as digital transformation, customer experience or cybersecurity/privacy.

As the recovery from COVID-19 slowly evolves, the study advises leaders to remain committed to the spirit of open communication and people-first policies.

“With most firms expecting to bring people back on-site in phases, leaders will need to help employees adjust to a changed environment while still managing the well-being, engagement and productivity of all workers. Purpose-led communication will continue to be critical to keep people informed, and leaders should demonstrate empathy while helping employees adjust to what will likely be an extended transition period.”

 

Updated April 14, 2020: PwC Survey Finds CFO Concerns Growing As Pandemic Continues

Big 4 firm PwC, in its third survey since COVID-19 stay-at-home orders took effect, finds that CFOs are increasingly worried about financial impacts, recovery time and cost-cutting, including layoffs and furloughs.

This survey of 313 finance leaders covered the week of April 6, when unemployment claims surged and attention turned to the federal stimulus package as deaths from COVID-19 mounted.

The top concern of respondents is the financial impact of the coronavirus as a recession looms and cash flow tightens. The survey says 75% are worried about the pandemic’s effects on results of operations, future periods, and liquidity and capital resources. A potential global recession is feared by 70%.

Also, CFOs are far less optimistic about the time it will take for their businesses to recover.

“Hopes that the outbreak will dissipate quickly are receding,” according to the PwC COVID-19 CFO Pulse Survey. “Only one in five respondents now believes they’ll be back to business as usual within a month once the outbreak ends. In contrast, during the week of March 9, as shelter-in-place orders started taking hold in the U.S., 66% of U.S. and Mexico respondents estimated that their companies could recover within a month.”

CFOs also noted that since so many changes are taking place now, with employees working remotely and customer interactions changing, that recovery will be complicated, as they try to predict what a new normal will look like after the outbreak ends.

As cost pressures increase, workforce reductions in May are anticipated by 26% of respondents and 41% expect furloughs. “This marks a significant change. Two weeks ago, only 16% of leaders in the U.S. and Mexico expected layoffs, while 44% expected furloughs. Separation of the workforce, or layoffs, is typically considered a means of last resort,” the survey says.

In another effort to cut costs, 67% of the U.S. leaders surveyed say they are considering deferring or canceling planned investments in the following areas: facilities/general capital expenditures 82%, workforce 67%, operations 55% and IT 53%.

To cope, nearly half (49%) of finance leaders surveyed say their company plans to take advantage of various government relief programs, most notably the $2 trillion CARES Act, which covers loans, loan guarantees, grants, assistance payments, contracts and tax incentives. Among the leaders who expect to make use of these measures, 81% expect to defer tax payments.

PwC is conducting a biweekly survey of finance leaders in the U.S., Mexico and 19 other territories. The next set of results will be released April 27.

The PwC survey says that finance leaders are making tough decisions as they prepare for a recession. “Helping people feel more prepared and informed by being transparent about the health of the company is crucial. Company leaders who are forthright about the decisions the leadership team is making — and how the workforce may be affected — can build trust by helping people stay informed, even if the news isn’t good. Trust and transparency are also a key part of stakeholder management. The situation is uncertain, and nobody can be sure what will happen, but providing regular updates means stakeholders won’t be caught off guard.”

 

March 17, 2020: PwC Study: CFOs Anxious About Massive Coronavirus Impact

Fifty finance leaders in the U.S. and Mexico are very concerned that the coronavirus pandemic may lead to a global economic downturn, according to a new survey by Big 4 firm PwC.

That No. 1 concern, cited by 80% of those surveyed March 9-11, is followed by worries about consumer confidence (48%), financial operations (48%) and workforce productivity (42%). The CFO Pulse Survey also revealed that every CFO or finance leader says their business is impacted by the coronavirus.

“We don’t think it’s a time for companies, or others, to hold onto original plans for 2020,” says U.S. Chair Tim Ryan during a media briefing, according to CFO.com. “It’s clear that the virus will change the plans of almost every company.”

Companies that are ready will feel fewer impacts, he adds. “Those that have been working very hard to control things like cost structure and liquidity will fare better, and those that weren’t will be more adversely affected.”

Most of the respondents predict the crisis will impact their revenues and profits, with 58% expecting a decrease and while 40% saying it’s too difficult to assess now. The leaders are considering financial actions as a result of the outbreak, with 62% planning cost containment measures, 44% adjusting guidance and 32% deferring or canceling planned investments.

Optimism was reflected in the survey as well, with 66% of respondents saying “business as usual” could return to normal in less than a month if the COVID-19 were to end today. Another 24% said it would take up to three months.

“The longer-lasting effects of the outbreak on consumer habits are difficult to predict, but some companies are already updating strategies in the face of temporary – and potentially permanent – changes in some markets or business models,” the survey report says.

PwC is conducting biweekly surveys of finance leaders in the U.S. and Mexico. The next set of results will be released on March 30.

More news from PwC

IPA Pulse Survey: A ‘New Normal’ at the Office

IPA’s latest pulse survey tapped the knowledge of nearly 150 MPs in late May on several key issues related to the COVID-19 pandemic. For example, as many states roll out phased re-openings and firms can return to their physical offices, 30% of respondents expect to have more than half of their staff back immediately, with another 31% expecting 25%-50% of staff back in the office.

And those employees returning to physical offices in the coming weeks are likely to encounter a much different looking and functioning workspace than the one they left in mid-March, but in what ways? That is, what types of safety measures will firms be putting in place in their offices upon reopening?

Among the more popular options, the ready availability of hand sanitizer will be one of the most ubiquitous new features of office life, with 96% of survey respondents planning to introduce this relatively simple, cheap and effective addition. In order to keep a lid on large gatherings, meanwhile, 87% of firms will strictly limit meeting sizes and 68% plan to reduce capacities in cafeterias and breakrooms.

For now, however, it appears as though many firms are opting to forgo potentially more stringent health and safety measures in their offices. For example, just over half (56%) are planning to require employees to wear face coverings, while far fewer will be performing daily temperature checks (36%) or erecting protective dividers between workstations (35%).

And among the 8% of respondents who have other plans in mind, several noted in the comments that their firms will be implementing staggered work schedules in order to cut down on the number of people in the office at any given time.

Catch up on more insights from this IPA Pulse Survey:

Shrinking the Physical Office Footprint

An Interesting Interlude for Internships

Helping Clients Conduct Layoffs and Furloughs While Mitigating Their Risk

Jill Pappenheimer

By: Jill Pappenheimer

Economists predict the unemployment rate could hit as high as 20 percent before we see relief, the highest rate since the Great Recession. So, where do accountants fit in to help business clients during this unprecedented time?

While job losses during the Great Recession were mostly gradual, after COVID-19, we have seen this occur in a matter of weeks and no one can say with certainly what the recovery will look like.

Faced with a steep drop-off in business, many companies are having to make tough decisions just to keep the lights on. That is why it is important that in addition to honestly and accurately accounting for layoffs and furloughs for clients, that accountants act as trusted business partners, ensuring compliance where possible and identifying opportunities to improve cash flow.

To that end, here is a brief overview of some best practices that accountants should be aware of for businesses conducting layoffs, reducing hours, or furloughing employees so they can help clients manage their finances, ensuring compliance and avoiding risk of legal action and still keep the needs of the “person” in mind.

Avoid Layoffs With Remote Work

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. This is where the accountant’s intimate understanding of their client’s or company’s numbers can help.

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. Whatever leadership decides, just bringing these ideas to their attention helps demonstrate the value you or your firm bring to the business.

Consider Furloughs Before Conducting Layoffs

From a staffing perspective, furloughs are often the best option — for those businesses that can afford it — as having staff on standby can help companies get back to normal operations quicker. But that is not the only reason to consider furloughs over layoffs.

Unlike layoffs, furloughs actually reduce labor costs immediately, without adding new costs such as severance packages and cash payouts. That is a major benefit to companies facing cash flow shortages.

There is a downside, though, which accountants should be aware of when proposing this option to clients. Furloughs can be quite tough on employees — in some ways, even tougher than layoffs.

To ease the burden on employees resulting from their paycheck suddenly vanishing, firms should ensure that clients 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.

Furthermore, accountants should make clear that just because furloughs allow companies to avoid the costs associated with layoffs, that does not furloughs are completely “free” either. For instance, per federal law, businesses that institute furloughs lasting one or more full workweeks do not have to pay salaried, overtime-exempt employees their usual weekly salary. However, if the furlough lasts less than a week, and any salaried employees have worked at all that week, the employer must pay those employees their full weekly salary.

Handling Pay Cuts

Some other popular options used to avoid layoffs are reducing employee hours or instituting pay cuts. While employers in most places have the authority to reduce scheduled hours for hourly employees, the story is a little more complicated for salaried employees, as employers are not allowed to reduce weekly hours to reduce compensation for exempt employees. They must pay exempt employees the same amount for each pay period, regardless of how many hours they put in.

What employers can do is have exempt employees work fewer pay periods, while still paying them in full for each pay period they work. Take it from the Department of Labor: Employers are allowed to make a “bona fide” reduction of an exempt employee’s salary “during a business or economic slowdown” as long as that reduction is not related to the “quantity or quality of work performed.”

However, these deductions from salaried employees’ pay should not be determined on a day-to-day or week-to-week basis, the fact sheet states. And the employer must continue to pay the employee at least the minimum weekly salary requirement (set at $684 on the federal level; individual states may have higher requirements) for the employee to retain their exempt status.

Conducting Layoffs

Ultimately, even with these stopgaps available to them, there are companies that will need to resort to layoffs to stay afloat. But companies intending to implement widespread layoffs should go into the with their eyes open with regard to the risks and negative effects it may have on their business. Accountants educated on the matter can help make sure clients understand these risks.

For one, employees who are laid off are far less likely than furloughed workers to return. That could make it hard to find qualified staff to perform key duties when the business is allowed to reopen.

And then there is the issue of deciding whom to lay off. 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. Ultimately, no matter what approach the business takes, decisions should be made on objective, numerical grounds wherever possible.

It is essential to consider the potential for implicit biases or bad data in the selection process. That is why once leadership has made their selections about whom to lay off, the list should be carefully reviewed for disparate impact on employees who fall in one or more protected classes.

The list of individual characteristics considered to fall under a protected class varies from state-to-state, but a broad definition would include:

  • race
  • religion
  • age
  • disability
  • gender expression
  • sexual orientation
  • national origin

In some places, even political affiliations are characteristics that cannot be used as grounds for either hiring or firing.

 It Never Hurts to Double Check

This article is hardly comprehensive of every single compliance, or employment, risk that businesses will face when attempting to scale back payroll costs as there are far too many to possibly list here. Obviously, the more you know about compliance the better and knowing when to rely on HR experts may an important way to avoid possible missteps.

Your clients will ultimately appreciate the extra effort to ensure the best decisions are made during this tumultuous time.

Reprinted with permission from the author. This article originally appeared June 10, 2020 on AccountingWeb.com.

About the Author

Jill Pappenheimer is a partner in the HR consulting practice of San Francisco-based BPM, an IPA 100 firm.

IPA Pulse Survey: An Interesting Interlude for Internships

IPA’s latest pulse survey tapped the knowledge of nearly 150 MPs in late May on several key issues related to the COVID-19 pandemic. For example, what changes (if any) are firms making to their internship plans at a time when money may be particularly tight and the majority of their offices may still be working remotely?

While only 4% of respondents reported having had to rescind offers already made to interns, 14% have made the decision to suspend their internship programs for the time being. Meanwhile, 12% of survey participants are moving ahead with their internships as scheduled but shifting them to an online experience, while 22% are keeping their intern commitments but pushing back start dates.

The highest percentage of respondents (47%), however, fell into the “other” category, where the range of explanations included the lack of an internship program to begin, plans for scaled-back program durations and some firms pushing ahead with their programs as scheduled.

Other firms, meanwhile, have opted for a combination of some of the measures noted above by reducing hours, curtailing program durations and cutting back on the number of internship offers going out. Still other firms continue sorting out their plans, while several with fall interns are holding steady for now and hoping for the best come September.

Catch up on more insights from this IPA Pulse Survey:

Shrinking the Physical Office Footprint