It does not feel that long ago before we were all reeling from the financial meltdown of 2008, and now, COVID-19 is wreaking havoc. Times are tough and are likely to remain tough for many months. Some economists predict the effects of COVID-19 to last a couple of years at least. Whatever happens, this global pandemic is likely to have a lasting impact on our daily lives. Personally, I would advocate one simple rule; don’t be a COVIDIOT.

Many companies are looking to reduce overheads until we see a plateau in infections and the return of some kind of market normality. With one of the biggest overheads being salaries, companies are now asking employees to take salary reductions, unpaid leave, or in many cases, making redundancies.

We are all aware COVID-19 has had a massive impact on our lives. We know that everyone is under a great deal of stress and the uncertainty can be overwhelming. As an employer, what are your options and how should you go about reducing your overheads?  How can you ask employees to reduce their salaries or take unpaid leave? 

This is not a deep dive into the legalese of Employment Law, for that there are many resources available (depending on your country of operation). For Thai companies, you may want to review the following from the legal experts at Mazars and Tilleke & Gibbins: 

• https://www.mazars.co.th/Home/News/COVID-19-Impact/Covid-19-Business-Impact-Update
• https://www.tilleke.com/resources/options-employers-thailand-during-covid-19-outbreak

Additionally, we are making the assumption you have already taken steps to reduce any non-essential workers. Whilst most of this article is common-sense, the focus is your core team and how you should approach these difficult conversations as an employer. (There will be a follow-up article covering your options as an employee).

If you have already decided to make redundancies, I would urge you to make full use of your recruitment partners.  We are not just here to support when times are good, but here to help when things get tough. If your recruitment suppliers are anything like us, they have rapidly switched to offering their client’s employees online workshops covering topics, such as CV writing, LinkedIn profiles, network building, job search, and interview techniques, and introducing them to clients who are still hiring.

As an employer, conversations around unpaid leave and salary reductions are never easy, but before you start thinking about mass redundancies (which in will likely carry a significant cost as well), there are other options to consider.

Salary reductions

Until some level of stability has returned to the market, it is a good option to begin by asking staff to accept salary reductions for the next few months, possibly longer. Perhaps you can mitigate the loss of income for your workers by reducing their hours accordingly; asking them to work 3 or 4 days per week? (Perhaps as an employee you could supplement your income by undertaking some freelance work?).

There may be key members of your team you simply cannot afford to lose. In such cases you may need to consider incentivising them to remain with your company through these difficult times. Perhaps you can offer to pay back the money that is deducted or a loyalty bonus at a time when the market is more favourable?

There is a legal case for salary reductions in Thailand (as outlined in Section 75 of the Labour Protection Act), but when approaching your staff about this issue, it is advisable to do so in the most humane way possible, as opposed to quoting legislation. 

At times like these, it becomes very clear which companies have made the effort to build their teams based on a culture of inclusiveness (which will help when it comes to having these conversations with staff). If you have been successful in building an inclusive culture, your team members are by your side through all situations. They feel a sense of achievement when your company experiences success and during difficult times, they understand why certain actions need to be taken, as they feel invested in your company. 

Regardless of your company culture, it is advisable to approach these conversations with honesty, transparency, and empathy. It is important to make clear the situation the company finds itself in and why these conversations are happening. Highlight that decisions are being made in an attempt to secure the long-term stability and security of the whole company.

Actions speak louder than words.  It is important to talk with your leadership team first and agree the salary deductions. This action will win trust from the rest of your employees as it shows you have their best interests at heart. 

I have spoken with certain companies in the past week who have approached these conversations from the perspective of “if you don’t take a salary reduction, we are going to make people redundant”. This is one way to approach the issue, but one that is potentially very short-sighted.

Keep in mind the damage you can do to your long-term reputation as an employer. Rest assured that if you treat employees poorly, it will impact your ability to hire the best talent when the market recovers. Bad news travels fast, and you can be sure if you treat your staff badly now, they will not be shy in sharing this with their network. (Their network being your future talent pool).

There have been a couple of high-profile cases in the UK where employers have not taken into consideration the full impact of their actions:

• https://www.forbes.com/sites/daviddawkins/2020/03/16/bad-times-for-billionaire-bransonstaff-at-virgin-atlantic-asked-to-take-unpaid-leave-as-coronavirus-cripples-air-travel/#36df88ff58ef
• https://finance.yahoo.com/news/wetherspoon-pub-vandalism-london-coronavirus-190214913.html

(Source: https://www.independent.co.uk/) 

The cases of UK pub chain Wetherspoons shows what could go wrong with poor treatment of staff. Following the shutdown of businesses due to COVID-19, Wetherspoons' owner Tim Martin told 40,000 workers in a video they should opt to take jobs at supermarkets. What followed was vandalism of a pub and calls for a boycott to the chain on social media. So, your actions not only impact your employees, but can also have significant impact on your brand in the eyes of the public.  

In asking staff to take salary reductions, you need to be as concise as possible, outlining the expectations of the company and how long you foresee this initial period of reduced income lasting.

Staff are obviously free to choose whether to accept the new terms or to start the process of seeking employment elsewhere. As an employer, it is important for you to be aware that companies are still hiring (particularly for tech skills) and that staff still have options available to them. 

Also worth considering is the cost of hiring; once this crisis is over (and it will end) it is likely you are going to be scaling your team again. So when calculating your current overheads, it is important to look to the future and factor in the costs associated with building again, once the market has stabilised.

Having been honest and transparent, if your employees choose not to accept the revised terms and they cannot see that you are acting in the best interests of the company, perhaps you should ask yourself; do I want them in my team anyway?

Unpaid Leave 

The same rules of honesty, transparency and empathy apply regarding unpaid leave. Whilst you could probably force your staff to take unpaid leave, such a demand is unlikely to benefit you in the mid to long-term and employees are likely to start looking for work immediately. 

A better option is to ask your staff to take unpaid leave or request volunteers in a clear and concise way. You need to outline how long the leave will last and what is likely to happen next.  

While having these conversations, it is important to reiterate employees’ importance to the company and make clear your vision of the future of the company.  Employees must be able to make decisions for themselves, based on the facts that have been presented to them. If a staff member cannot accept a salary reduction or unpaid leave, there may be factors in their personal lives preventing them from doing so.

During difficult times, honesty and integrity are what makes you stand out as a leader.  If it takes a crisis for your company to create a culture of empathy, transparency, and inclusiveness, you are already benefiting from it. 

Innovation and transformation do not always have to be centered on products and technology.  Innovation is as important in employer brand and culture.  If you are able to avoid being a COVIDIOT, you may find yourself at a better place after the COVID-19 crisis. Your company may become stronger with improved work culture and ethic. 

In summary, we are all in this together. Everyone is feeling the pain of this current crisis. Let's not forget that while our businesses may be struggling, fatalities are happening. So, be decisive and make the changes that are necessary for your business to survive. 

Don’t be a COVIDIOT.

(HI Recruitment is a boutique search consultancy with over 25 years of local and international recruitment experience; we are currently offering free consultations to any companies or individuals who need advice during this ongoing crisis, contact us for more information: [email protected]).

Additional Resources:

• http://www.jfcct.org/major-business-issues/covid-19/
• https://www.dropbox.com/s/zgdsmplt46pd9lb/JFCCT SME - 200325 Measures Summary COVID19-Rev1.1.pdf?dl=0&fbclid=IwAR3P_j0emv6tmGr9VDUmiwRNJzksKaNTwU57NRnQw_hQXf1inSCaYd-YLS4
• https://mailchi.mp/amchamthailand/amcham-briefing-friday-4405106?e=f2daad513b

(subject to publication in the Royal Gazette)