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Recession Proofing Your Business: Managing Your Staff

Recession Proofing Your Business: Understanding Staffing Management

Recession Proofing Your Business: Managing Your StaffThe April 2023 Jobs Report released by the BLS in early May showed an unexpected hike in job creation. Perhaps your business contributed to this impressive statistic. Nonetheless, if we get a recession—or merely a significant slowdown in business that cuts your revenue—what will you do about your staff?

Options for managing your staff:

Adding staff

As the BLS statistics show, businesses are continuing to hire new workers despite concerns about a recession. The unemployment rate dropped to the lowest level (3.4%) since May 1969! If you want to hedge your bet that a recession will happen and you won’t need as many workers then as you have now, there are ways to find help for the present if you need it without committing to a full-time employee. Your options:

  • Temporary help. Engage a worker for a particular project or for a limited time through a temporary employment agency. You pay an hourly rate to the agency; the agency remains the employer of the temp worker. The SMB Guide lists the best staffing agencies for 2023.
  • Independent contractors. Engage workers who are in their own businesses. You pay a fixed amount—an hourly rate or a contractually-agreed upon fee for the work performed. Today, depending on the nature of the work to be done, it’s easy to find independent contractors through various platforms, such as Fivrr and Upwork. Caution: You can’t simply label a worker as an independent contractor if he or she is really an employee (e.g., doing the same work alongside an employee). If you misclassify a worker, you face serious consequences, such as back employment taxes with interest and penalties. Check both federal and state rules on worker classification to avoid problems.

Cutting staff

There are different ways to reduce your payroll. These terms were explained further in a previous blog.

  • Attrition. If someone quits or retires, you simply don’t find a replacement. If necessary, you can retrain existing staff to do the work that had been done by the person who left your company.
  • Furloughs. You technically keep workers on the payroll but don’t pay wages for the period they don’t work. This arrangement lets you continue to furnish employee benefits, such as health care, and the furlough period counts as credited service for purposes of your qualified retirement plan if you have one.
  • Layoffs. This means severing ties with a worker. If the worker performed poorly, you call it firing; if they did nothing wrong, it’s a layoff. Either way, if you bring the worker back on staff, you are rehiring this person. Note: If you have 100 or more employees, you are subject to the federal WARN Act, which requires you to give at least 60 days written advance notice of a worksite closing affecting 50 or more employees or a mass layoff affecting at least 50 employees and 1/3 of the worksite’s total workforce.

Final thought

Peter Drucker, management consultant and author, said: “Management is doing things right; leadership is doing the right things.”

With the prospect of a recession looming, knowing what the right thing to do is very challenging when it comes to staffing decisions. Take your time and a long view so you don’t disappoint workers or ruin your bottom line.