Implementing Cost-Savings Measures During COVID-19
How employers can implement cost-savings measures for business sustainability
As companies battle the business challenges created by the Covid-19 pandemic, some may implement cost-savings measures as a means to achieve long-term business sustainability. In these cases, the Tripartite Advisory on Managing Excess Manpower (TAMEM) provides valuable guidance. Employers may consider the following options, based on the severity of impact on employees:
- Adjustments to Work Arrangements without Wage Cuts
- Adjustments to Work Arrangements with Wage Cuts
- Direct Adjustments to Wages
- No-pay Leave
Here we share two examples of companies who faced excess manpower issues, and how they arrived at a viable solution.
Managing Excess Manpower – Example 1
The Business Challenge
A major hotel chain was drastically impacted by the Covid-19 outbreak since the start of this year. Business at the establishment’s F&B outlets had dwindled and occupancy rates fell sharply due to the lack of travel. The hotel’s management were considering ways to implement cost-savings measures to keep the business afloat.
The company initially planned to immediately cut the pay of all staff by 80%. The Management reasoned that since there were few guests and less work to be done, a steep pay cut was an understandable next step.
However, after discussion with HR, Management realised that an immediate steep pay cut would have the following adverse effects:
- Have a bigger negative impact on the livelihoods of their lower wage earners.
- Lower staff morale at a time when some employees were expected to take on different roles at the hotel to cover for colleagues who were affected by travel restrictions.
The Solution: Adjustments to Work Arrangements with Wage Cuts
The Management team recognised that they needed to tailor their cost-savings measures, taking into consideration the needs of the business and potential hardship faced by employees:
- While a salary reduction was still implemented for all employees who remained working full-time, the quantum was tiered such that Management team took the biggest pay cut, and rank and file employees had the smallest reduction in pay.
- Existing manpower was also retained so the hotel could respond quickly when the economy picked up. Thus, employees who had a reduced workload were placed on 1 workday per week arrangement and paid 95% of their monthly salary, by utilising company reserves and government support schemes.
With this approach, the company was especially able to protect the livelihood of rank and file employees, by preserving jobs and ensuring minimal reduction in monthly income.
Managing Excess Manpower – Example 2
The Business Challenge
An SME that provided maintenance support for machinery equipment had decided to implement cost-savings measures. While the company was classified as an essential service, the employer found it challenging to operate as usual. While the repair team worked off-site and continued to function as usual, the company was unable to comply with the safe distancing measures for the administrative support team that was based in the office.
Thus, the employer decided that the administrative support team should stay home for their own personal safety. The employer planned to implement no-pay leave for these employees, as they would not be working.
The Solution: Adjustments to Work Arrangements without Wage Cuts
Upon reviewing the situation, the employer found that it was possible to carry out the majority of administrative tasks in a work-from-home arrangement. Additionally, as repair works continued for customers, there was administrative support such as invoicing, required.
Thus, the employer together with HR temporarily redesigned the roles of the administrative team, to meet the needs of the company in the Covid-19 pandemic:
- Half of the administrative team was required to work from home and carry out tasks such as responding to queries and catching up on overdue administrative tasks.
- The other half of the team was required to work from the office in a split team arrangement, where their start and end times were staggered to minimise contact.
By redesigning the job scopes of the team, the employer was able to maintain business operations and ensure that employees received their usual monthly salaries.
In these challenging times, the decision to implement cost-savings measures should not be based on the current business situation alone. Employers should also position themselves to capitalise on the anticipated future economic upswing by preserving their workforce as far as possible. With forward-planning and consultation with HR and employees, employers can determine a mutually agreed upon plan to support the business and employees’ livelihoods.
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