Situation Report: Strategies for Reducing Staff Costs

The Event Leadership Institute checks in weekly with a select group of event planning business owners across the US and Canada. Group members report on how their businesses are faring and offer coping strategies amid the massive disruption from COVID-19. We call it the Situation Room. Recently, the conversation covered reducing staff costs. 

Event Leadership Institute will continue sharing insight and experiences from the Situation Room on our blog. Check back with us for more.

When to let employees go

Consensus in the Situation Room was that employees are valued now more than ever. Unfortunately, the virtually overnight cancellation or deferment of booked events has put some business owners in the dreaded position of having to contemplate staff reductions. Two different approaches emerged:

• Keep employees as long as the cash and the hope hold out. Become more willing to pivot your service offerings (bidding on non-event related government contracts, for example) to keep work coming in.
• Conserve cash and downsize as soon as possible. Stay within your core “lanes” and use this downtime to improve internal processes, enhance training and get the business better positioned for the recovery. 

Avoiding the exempt to nonexempt conversion  

US labor laws recognize two categories of employees. Exempt or salaried employees get the job done no matter how long it takes (a plus for event planning companies). Non-exempt employees are paid for every hour they work and qualify for the federal or state minimum hourly wage and overtime pay. As business owners contemplate cutting pay and hours for employees to reduce overhead, review regulations to avoid triggering a change in employee status from exempt to nonexempt.

Tiered salary reduction schedule

Consider a sliding scale for pay reductions:

• Employees earning $60,000 or less received a 5% pay reduction
• Employees earning between $60,000 and $70,000 received a 10% pay reduction
• Employees earning over $70,000 received a 20% pay reduction

How to let employees go

A phased approach to reducing staff costs is another alternative for business owners:

Step 1– Hold off on paying Q1 bonuses. The payments don’t have to be withheld indefinitely, just until the worst is over.

Step 2–Cut salaries and (possibly) hours either based on salary levels or at the same rate for all employees (50% across the board, for example)

Step 3–Release employees temporarily. States like Michigan allow employees to access Federal Benefits even while on furlough up to 120 days.

Step 4–Lay off employees indefinitely to make them eligible to seek unemployment benefits, which may now be increased with the new stimulus bill in the US. Draw up staffing plans for when business comes back, such as collaborating with competitors and hiring former employees from competitors (who sign a non-compete agreement).

Deciding who to lay off

Business owners who have the “luxury” of keeping some employees find themselves having to choose which people to keep or let go. Speak with employees to determine what other skill sets they have with the hope the company can productize those and save some jobs. Talk to clients to discuss the types of events (some are converting to virtual) they anticipate having in order to inform decision-making around employee cutbacks.

Preserving relationships

Many in the Situation Room expressed their desire to manage staff reductions in kind and respectful ways. For example:

• During the customary two weeks while employees remain at work before their last day, have deeper conversations with them both to prepare them and help reduce their anxiety around losing a job.
• Provide employees with certainty given the stressful and uncertain times. Tell them, “I don’t know when this will end but I can guarantee that I will make decisions by specific dates.”
• Work with a caterer to send meals to employees he was forced to let go.
• Pay for or direct employees to online learning opportunities, such as those offered by the Event Leadership Institute.

What about the people that stay? 

Because many employees are working from home, business owners are finding creative ways to stay connected with them, including a weekly virtual happy hour or an online “Big Ideas” suggestion box so employees can send leads on new business and feel as if they’re contributing in meaningful ways.