Small business owners have choices to protect employees when they can’t work due to the pandemic or economic downturn. It’s ideal if you can offer workers paid leave. However, that’s not feasible for some business owners and can negatively impact income and cash flow. Here’s information on furloughed employees and bringing them back.
Should you rehire former employees?
Small business owners face daunting business decisions every day. One of the most important issues is whether to rehire former employees or start fresh with new talent. Studies are showing that rehiring is the right path for 2021.
According to a comprehensive Wall Street Journal study:
“The case for hiring back employees who had been laid off or quit seems compelling and obvious. Hiring them will decrease recruiting and onboarding costs. Recruiting an old employee also will feel like a safe move—you know them, they know you, and they will be easy to reintegrate into the organization. They even may have gained new skills or perspectives in the interim.”
Launching a search for new employees and training a new hire can be expensive and time consuming. A rehired employee knows your business processes and systems and should already be well-trained. Bringing back familiar faces can also be great for morale. Many employees were laid off due to no fault of their own and you’ll reinforce your commitment to them if you rehire.
Benefits of rehiring former employees
Increased loyalty, engagement, and commitment are three big benefits to rehiring employees who worked for your business before the pandemic layoffs. Another benefit of rehiring employees is that they will likely be more engaged and committed to the organization. Former employees can also offer a fresh perspective that can improve operations and ultimately the bottom line.
The difference between furloughs and layoffs
A furlough is a reduction in pay and/or hours on a temporary basis. Employers set details of a furlough based on financial and business needs and a furloughed employee is still technically employed. Hours and pay will be reduced, down to zero, for a set of time, like two weeks, a month, or longer. Check in with your company health plan regarding coverage for a furloughed employee. In many states, furloughed employees may be able to collect unemployment benefits as well.
Layoffs are when the employer cuts ties with the employee completely. This can be due to problems that are not performance-based. Layoffs can be an option due to budget cuts, business reorganization, an attempt to strengthen cash flow, or the business no longer in need of the position and employee responsibilities.
Did you lay off or furlough your workers?
Many small business had to cut payroll, layoff or furlough employees. Although the 2020 holidays are approaching, consumer spending is low and your inventory might be sitting unsold.
An employee furlough is a mandatory suspension from work without pay. It can be as brief or as long as the employer wants during the coronavirus pandemic.
Bringing back furloughed employees
The process for bringing a furloughed employee back as full-time workers is an easily understood strategy. It may be more expensive but you can bring team members back swiftly.
It’s recommended that you give furloughed employees plenty of notice about bringing them back on board. If there are changes in pay, schedule, duties, benefits, et cetera, lay it out clearly along with the expected start date. Internal communication and transparency are key here. Be prepared with answers to questions you might be asked.
Our article Small Business Communication To Ease Anxiety in Times of Crisis, can help you craft a plan and stick to it.
If the furloughed workers you want to bring back are concerned about safety related to COVID, check with the Occupational Safety and Health Administration (OSHA) guidelines and assure them that you are taking the necessary steps to assure their safety. That could include remote work, online meetings, facemasks, see-through plastic barriers, or hand washing stations.
What if a furloughed employee does not want to return?
This is a situation where you can legally terminate employment. Unemployment benefits might be affected so be sure to report the refusal to the Department of Labor.
Rehiring laid off employees
The process can be more complex than the strategy for bringing back furloughed employees. Here are steps to take. This may not be a comprehensive list due to changing legislation. Check with a legal professional if you have any questions about rehiring.
- Attempt to rehire the same workers to reduce liability and you may have a case against you for wrongful termination. Wrongful termination cases are civil lawsuits that can cost you a bundle so avoid!
- Rehiring your old employees also reduces the amount of time you’ll need to spend on training. Morale will be boosted from employees who have been living with financial and career insecurities.
- If you aren’t able to bring back everyone, make non-discriminatory business decisions. Again, you want to avoid any legal issues.
Steps to bring laid off workers back to your team
Notify of the opportunity to return
Reach out to your laid off workers by email or other written communication to let them know that you’d like to rehire them. As with furloughed workers, presenting laid off workers with flexibility around a re-start date is good practice. Be prepared for this employee to potentially turn down your offer due to having taken another job, or concerns around health. (See information above)
Treat as a new hire
Treat this worker as a new hire from a paperwork standpoint.
You’ll probably need to have a rehired worker fill out a new I-9, W-4, and other tax documentation. They may also need to sign new contracts, offer letters, nondisclosure agreements, acknowledgment receiving the employee handbook, and anything else you’d ask a new employee to review and complete.
You may be able to treat a rehired employee as one with a prior relationship: tenure, PTO, and paid sick leave. Many state and local statutes require that business owners grandfather in an employee’s vacation policies, for example. You may want to grant that same tenure as a show of good faith.
As with furloughed workers, you should communicate the following to your rehired workers:
- Changes in schedule, work hours, supervision, compensation, benefits, job duties, and other employment terms.
- New safety precautions and practices such as temperature-taking, disinfecting shared surfaces, and requirements around distancing.
- If working remotely, meeting requirements, check-ins, availability, and other aspects of connection and engagement.
- That employment is still at-will, and you can continue to alter their role as your business evolves and rebuilds. A future furlough or layoff is still possible if employing full-time workers doesn’t fit into your adjusted business plan.
How bringing back employees affects PPP Loan Forgiveness
Loan forgiveness for PPP funding requires you use at least 60% of that loan on payroll costs. The rest of the funds must be used for eligible expenses like rent, utilities, and mortgage interest.
You can also use your PPP funds to rehire or recall workers. Under the terms of the Flexibility Act, you have until December 31, 2020, to bring back all of the workers you laid off or furloughed in order to be eligible for full forgiveness. Note that each employee that you don’t bring back means less of your PPP loan is forgiven. During the covered period of your loan, take advantage of this, and offset costs.
What if my PPP funds run out before rehiring?
If your business’ financial situation hasn’t improved and your PPP loan runs out, you are not required to keep employees on staff if you can’t afford it. You can lay off or furlough these employees again if necessary.
Will your employees work remotely, on site, or via a hybrid blend?
Seventy-two percent of companies say employees will be able to return to the workplace over the next five months, with 50% reopening between August and October, according to a Conference Board survey of 231 human resource leaders April 5-16. The results were provided exclusively to USA TODAY.
Yet 79% of the mostly large businesses say 10% or more of their employees will be able to work remotely at least three days a week a year after the pandemic subsides. That compares with 26% of firms that permitted staffers to primarily work from home before the health crisis.
Nearly nine in 10 of the HR executives surveyed say they’re also willing to hire remote employees around the country or globe in some form, compared with about half before the outbreak.
Overall, the survey depicts an American workplace that will be transformed for the longer term because of the pandemic. Step back and look at the ramifications of your work situation and how it can help you meet your goals and keep your employees happy.
Rehiring laid off employees and recalling furloughed workers is a good sign that your business is rebuilding. Stay positive and seek out low-cost funding if you need inventory, equipment, working capital, or debt refinance.