What is proper and generous?

[TexasHusker]

I have 4 franchise locations with a bi-weekly payroll of around $20,000. If we are forced to close, even without payroll, I’ve got $13-14K a month in fixed expenses, with zero income.

Is it generous for me to pay employees 100% of their wages for 2 full weeks? Should I stagger it and say “if you’ve been here 2 or more years, you get X, less than 2, you get Y, and if you’re brand new, you get Z?

Im looking at not making a profit for literally months. I figure the next 3-4 months could cost me $100,000 or more, and that’s if I’m careful. I feel sorry for similar businesses with no reserves. They are likely done.

Thoughts?

[mumof2]

I think if you are going to close they should get their 2 weeks pay but if they don't work after that and you remain closed then they won't be working or getting paid after that...its hard..but let them know what they are in for so they still have a job when you are open if you have to close for an extended period of time then you won't be able to pay them until you ropen (if that makes sense)

[cypher1]

Initial thoughts, if you can afford to pay them 2 weeks of full wages, that's more than generous, and a simpler system to budget. In comparison to a severance type option based on years of service with your company. Then again, I'm no business owner.

[TexasHusker]

How in the heck are these people going to survive with no income ? Most are $10 an hour employees, some with kids

[Nutria]

How in the heck are these people going to survive with no income ? Most are $10 an hour employees, some with kids

Keeping them afloat while drowning yourself isn't a good idea either.

[~bs]

Layoff the workers, they will collect unemployment.
Ask your landlord for rent relief
Tell your workers when the situation recovers, you will do your best to offer their jobs back.

Survival of the business is the highest priority. Putting your employees on welfare funded by you is not the way to go.

[disneysteve]

Wow. Really tough question. I've got exactly zero experience or knowledge to apply to this situation so I'm not even going to weigh in. I just commend you for caring enough to ask the question.

[Fishindude77]

On several occasions we continued to pay laid off employees a stipend of $2-300 per week in addition to their unemployment with the message that we wanted them back soon as work picked up. Have also done charity projects and paid employees when we didn't have enough for profit work on the books. Also have kept a few employees around doing misc. long overdue maintenance and clean-up projects, kind of making work for them when we didn't have much.

You've got to do what's right for you without sinking your own ship. This is a good example of why it's best to get debt free soon and possible and build yourself a big reserve of "dry powder" to weather economic downslides.

[TexasHusker]

If we laid everyone off, it would be very destructive to our business. We are a service business with loyal employees, and customers, and rebuilding a culture from scratch could take years.

if we have a lockdown, my guess is that it would be for 14-15 days. I can weather that with ease and pay everyone. After that, I think i we would be very busy due to pent-up demand. I also see how it could be an investment in our future. Our team could see it as “wow, my company is taking care of me. I am staying here from now on and I’m going to do a good job for them.”

[disneysteve]

There is another option between paying them and not paying them. You can partially pay them. Maybe 80% or whatever number you feel would help them get by while also not draining your reserve as quickly. If they aren't working and are staying at home, expenses drop somewhat. No gas to get to and from work. Less eating out. Stuff like that. So a modestly reduced income might accomplish the same thing.

[greenskeeper]

Lay them off so they can collect

[~bs]

If we laid everyone off, it would be very destructive to our business. We are a service business with loyal employees, and customers, and rebuilding a culture from scratch could take years.

if we have a lockdown, my guess is that it would be for 14-15 days. I can weather that with ease and pay everyone. After that, I think i we would be very busy due to pent-up demand. I also see how it could be an investment in our future. Our team could see it as “wow, my company is taking care of me. I am staying here from now on and I’m going to do a good job for them.”

It's up to you, no easy choices. You could put everyone on life support, 20 hours/week and hope people don't quit. But if you do that, they're better off collecting unemployment. you could keep your core workers employed, say 30 hours/week and layoff everyone else. You're also assuming that the current situation only lasts a few weeks, this may last until at least august or longer (if trump is to be believed). The other thing you could do is put people on unemployment, which will pay half their salary, and assuming the slowdown isn't too severe or long lasting, you can tell them your intention is to hire them back, and provide a signing bonus for the difference between unemployment and their regular pay and make them whole.

I own a side business, no employees. But I've also run my fair share of businesses over the years. I will tell you this, the current slowdown is nothing like I've seen before, and I have hard sales data for 9.11, 2000 tech bubble, sars, mers, swine flue, 2008 crisis, etc. The deceleration of business and the economy is astounding. As a business, you need to act quick and decisively if you want to survive in this climate. Yes having a good cash reserve is a huge benefit, but you can't afford to bleed forever.

During the 2008 financial crisis, I strongly recommended the company to shut down because business essentially went to 0 with no end in sight, yet the company had large stockpile of cash and low debt. Imagine a 26 year old kid that just started a few months ago telling the CEO to shut her company down.... She didn't take my advice, and eventually burned through the cash stockpile, and ended up going into bankruptcy and laying everyone off. By staying open, she just prolonged the suffering by maybe another year.

[~bs]

you ignored my suggestion, but again, you should look for rent relief. it's not guaranteed, but a decent chance that a good landlord will attempt to help in a force majeure type of situation. For my current company, in previous events, we saw rent reductions for 25%-50% for a few months. Even the stingy landlords providing 1-2% advertising fee credit is better than nothing.

[ua_guy]

Would an SBA loan be possible? Selling other assets?

[TexasHusker]

I am fortunate that I could go out months if I needed to. I don't know that we will be shut down, but I can't see that scenario because there is not practical way to lock down everything in this country for over 2 weeks. People have to have groceries, gas, medicines, dog food, diapers, etc.

I do appreciate all of the feedback. I think after reading through the posts, I am committed to paying everyone 100% of wages for two weeks, if we have to close. Hopefully we would be able to get back on track after that. That way, my employees can just enjoy being home with their families to the extent possible and not have to worry a thing about their paycheck. They are all tipped employees so that are taking a pay cut any way.

I could go into debt and get a loan, but if I have the cash, I don't see going into further debt.

I'm going to keep paying my rents unless I am compromised such that it is a huge burden. Why should I attempt to pass on my hardship to the owner of the building? I think if we will all own our own stuff through this crisis and not try to transfer our stuff to other people, we will get through the crisis faster and cleaner.

Bad things befall us all. Hopefully we can all be big boys and girls and own it and move on.