Communicating Salary Cuts & Layoff With Your Team

Written by: Tanya Wigmore

Published: 29 April, 2020

We're moving from "weeks" to "months" of economic impact and business disruption from COVID-19 and you're probably in a place where you're checking the finances more regularly to make sure you're still OK. 

If you're not OK and you need to make some cuts to keep the lights on, you need to communicate that to your team. You might be feeling like the worst person in the world and expect that your team is going to be pretty upset with you. How you communicate these changes will make a difference in that -- approaching this without tact can make you come across as the kind of person (or company) no one wants to work for again and can fill your company's Glassdoor full of negative reviews for your workplace and for you personally. 

Don't make this about you. When you are communicating key messages about layoffs and salary cuts to you team avoid making the conversation about you and focus on what this means to them. That's what they care about. 

Plan layoffs in advance

If you're having a rough year and you know that you may need to make tough staffing choices in the future, you should be planning ahead. Try to forecast how bad things could get (think "worst case scenario") and think of the team you'd need to survive that scenario. Also look at different structuring options that will help you weather the storm and keep your business in tact so you can scale back up when the market is back where you'd like it to be. 

Taking the time early on to identify your indispensable team members vs the ones that would be cut first in different scenarios, and communicating those with HR, can help your team be better prepared in the event that these hard decisions need to be made. 

Do not gossip about potential layoffs. No one should 'hear it through the grapevine' that they're getting laid off. All potential team changes should not be discussed with team members outside of the decision-making process until the employee themselves has received notice. 

If you have options, let people weigh in on their future

Don't make assumptions that people will be happier with a pay cut and keeping their job vs getting laid off entirely. If you have some flexibility and provide your employees with different options such as reduced pay, reduced hours, severance packages or other variations that reduce your overhead and get your budget in check, they can choose the option that's right for them and (hopefully) feel a bit better about the transition. This can give people who had one foot out the door the chance to leave with grace (for many, just 'having a job' isn't enough to make them want to stay) and can give those who really need this income a chance to stick around until they find another job or until finances improve and you can put their salary back to what it was. 

Other options that might be available are moving roles to other departments or teams or taking an unpaid sabbatical.

Don't give options and then take them away. 

One CEO knew that he had to cut their payroll expenses by 20% to make it through the next quarter. He also knew that the had a dedicated team who wanted to remain employed and would willingly make sacrifices to help the company and save their jobs. This CEO told his team that they had to reduce their payroll and asked the team how much they would be willing/able to reduce their salary by in order to keep their jobs. Most said that they could do 10-15%, none said any more than 20%. Because these 'voluntary' cuts weren't enough to make up the gap, he still had to lay off a significant number of people. This left his entire team demoralized and not trusting that their voluntary cut would save them their job. 

Be fair

When giving options, make sure you're giving options that align with what you would offer someone who is joining your company. Be cautious that you're not just taking advantage of team members because they have nowhere else to go.  

Let people know what's going on. 

It can be tempting to keep any word of layoffs close to your chest because you don't want to scare your team and have key team members out looking for jobs. Letting people know that there might be cuts can make people nervous and can cut morale. On the other hand, including the team in the conversation about drops in revenue and key performance metrics slipping might help them understand what they can do to help make a difference and improve the outcome of the situation. 

Transparency breeds trust and accountability breeds responsibility. Having scorecards and accountability metrics for each department that are visible throughout the organization can help keep that visibility year round. With clear goals and objectives that are shared throughout the company, it should be known within the organization when things are not going well. Layoffs should not come as a complete surprise to staff when they happen. 

Maintaining accountability can also avoid the 'blame game' later on when things aren't going well and individuals or teams are singled out for restructuring. Further reading: 5 Steps to a Great Scorecard.

Communication with those who are exiting

As you prepare to sit down and discuss layoffs with those who will be exiting the company, it's important to cover these areas (source). 

  • The business rationale for downsizing
  • A clear notice of termination letter, including effective date
  • Benefits/severance package details
  • Outplacement services being offered and references for future job applications
  • Structure for next steps, such as turning in company equipment and saying goodbye to co-workers
  • Ask the employee if they have any questions at this stage

The ideal length for this meeting should be about 10-20 minutes with the initial act of notification happening within the first 5 minutes, so the individual has time to express their feelings and ask questions. If you extend this meeting much longer than 20 minutes you have the possibility of the conversation derailing or becoming a debate. Any shorter than 10 minutes and you're likely not giving enough time to give the individual a chance to receive and process the message, which comes across as being callous or insensitive.  

Each layoff should be communicated by the employee's direct manager and a member of HR. Do not delegate layoffs to a lower manager or other employee. 

Communication with those who are remaining

Ideally, you'll bring together the rest of the team as soon as possible to discuss the changes that are happening. People have a hard time with change and it would be difficult to over-communicate during this process. Your remaining employees will have their own feelings about the layoffs and may have many questions about how this change will affect them. Your managers will need to step up to ensure that each member of their team is coping with the change and understands how this impacts them. Impact Group recommends the following when communicating layoffs with your team:

  • Over-communicate new processes and team structures so that every employee knows what's happening and what they need to be doing.
  • Create space and time to listen and respond to their concerns and fears.
  • Coach your employees and give ample praise. Be very mindful of corrective measures. 
  • Create and share your future vision of the company and show each employee how they fit into the long-term plan. 

Timing is everything

When you have to do layoffs, be conscientious of when you do them. We heard from one employee who was laid off first thing Monday morning -- and was still expected to work through the week. Generally speaking, when you do layoffs you should ensure that you have a sufficient term for any knowledge transfer that needs to happen while also letting someone leave as early as they can after the layoff. They're not going to want to be there anymore once you give them notice. 

The best time to do a layoff is Friday morning or afternoon so that the person affected can pack up their things and go home as they normally would for the weekend. They'll continue to have their normal weekend support and activities and the shock won't really settle in until Monday when they don't have to get up for work. Doing layoffs on a Monday morning can lead to a long, depressing week and make it a more difficult transition. 

It's not about you

You may also be taking a cut to your salary or to your overall income. It may tempting to share this with those who are getting pay cuts to help create the solidarity and "shared experience" so they understand that you too are affected, but by and large they're not going to care. Your income, your spending, and your financial hardships are yours to bear and should not be used to solicit empathy from your employees. This is especially true if you're a public company with a large disparity in compensation between the bottom and the top. Sharing that you're taking a salary cut when you're making significantly more than those who are taking the same cut can come across as being incredibly insensitive to how the loss of income will hurt those at the bottom the most.  

Hold exit interviews

Book in a time, separate from the time you communicate that they're being let go, to give the employee a chance to give you feedback about your organization. Exit interviews can be very insightful to where you need to improve as an organization. 

Onward and upward

Every business will have times of growth and times of constriction. Having to downsize your team can take an emotional toll but it can also provide a lot of opportunity to regrow your team in a healthier and more sustainable way. 

Growing an Agency

Written by: Tanya Wigmore

Tanya Wigmore is the founder of CRO:NYX Digital and is passionate about growing healthy teams and businesses. With an extensive background in inbound marketing, search marketing, web analytics, CRO & UX, she's always finding new ways to apply optimize and improve.

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