Ideas for Paying Employees When Finances are Tight

The coronavirus has rattled the world, and while the health consequences are dire, the economic fallout could be worse.

In just one week, from March 7 to March 14, initial unemployment claims jumped by a third, rising from 211,000 to 281,000. And while we don’t know whether workers have been laid off or furloughed, we do know that lost jobs are bad for families, employers, and the nation.

Job losses translate into increased federal spending and a slower response to unemployment claims, and those businesses that have to hire or train new employees down the road will undoubtedly take a financial hit later. Even if it’s difficult, your business can benefit by keeping employees on payroll and by modifying your business plan.

What might this look like? Here are some options to consider:

Lower Overhead Expenses

The most effective response to financial pain is to freeze spending wherever possible.

This may mean holding off on new investments, eliminating projects where costs exceed value, or re-proposing previously rejected cost-savings ideas. Want a more comprehensive guide to cutting costs? Check out this article from the Harvard Business Review.

Consider Alternative Financing

While borrowing may not have previously been in your plans, the Small Business Association is working directly with state governors to provide targeted, low-interest loans to companies that have been severely impacted by COVID-19.

The SBA’s Economic Injury Disaster Loan program may provide the vital support you need during this temporary loss of revenue. Other options to consider are family borrowing, hard money loans, or seeking a float loan from a customer or an external “angel investor.”

Liquify Assets or Discount Existing Receivables

How can you attain missing funds to pay employees in a crunch?

“Beg, borrow, or sell whatever you need in order to come up with the funds,” says Rod Jorgensen, the director of counseling at the Nevada Small Business Development Center. Whether you sell vehicles, buildings, or equipment, put every option on the table for consideration.

Donald Todrin, founder of the Northhampton, MA-based Second Wind Consultants, says taking as much as a 50 percent hit on your outstanding receivables may also be a wise strategy:

“If I’ve got $25,000 out on the street that I’m owed, I’d slash it down to $10,000 on a promise [that vendors] wire me the money today,” Todrin said. “Pay me half [of what you owe me] and I’ll wipe [the debt] out. And you raise cash instantly and overnight. Now you pay a price for that because that’s your overhead money, but you cover your payroll. You got to play for another day.”

Be Resourceful and Keep Employees in the Loop

If you know you are unlikely to make payroll, it’s essential to be honest upfront.

Proactive communication is crucial during a crisis. If finances are tight, tell people up front, starting with the natural hierarchy of company leaders and involving them in the process. Allowing leaders to inform their teams can soften the blow and make it easier to gather feedback.

And be creative. Teams that want to retain employees in extremely tight situations may consider shrinking paychecks across the board or ask the highest paid, top-level staff members to (electively) forgo paychecks for a short time so lower-level employees can still be paid. This spreads out income and grows confidence and unity in your staff.

People First

Though you may not be closing shop, many businesses will experience shortfalls in this season. Creative, sacrificial entrepreneurs will work hard to protect their most valuable asset: people.

Grow Your Business Through Successful Staffing

Todd Fishman and Hunter Brooks were childhood friends who attended the University of Washington before heading to corporate Manhattan for several years. The friends reconnected in New York, bonding over their love of great salad.

Yes, young men eating salad.

Salads are so trendy that in Manhattan the lines for gourmet salad bars stretch around the block. While waiting in one of these lines, the friends had their “Aha” moment. They looked at each other and said, “This would be killer in Seattle!”

A Quickly Budding Dream

Enter Evergreens healthy food chain, co-founded with their associate Ryan Suddendorf in 2013.

Over five years, Evergreens has seen 200% revenue growth each year, with six stores in Seattle and a projected 11 more by 2019. Evergreens caters and offers salads, wraps, and grain bowls while keeping food fun with names like “Dice-Dice Baby,” the “Cobbsby Show,” and an Asian mix called “Pear-ly Legal.”

While entertaining, Evergreens is rooted in a focused business strategy to ensure the start-up succeeds. Successful staffing has been fundamental as Evergreens has scaled for growth and shaped a positive culture to attract the very best team.

Infrastructure that Keeps Pace with Growth

People are the backbone of every company, and Suddendorf said staffing was lean in the early days.

Chaos abounded, with lines out the door and the three founders acting as the company’s only corporate employees.

“It was like changing the car tires on a moving car,” said Suddendorf. “There was no time to step back and establish a process and then try to teach it to everybody in the stores.”

“We were working in the business rather than on the business,” Fishman said. “We were very much in the weeds.”

In retrospect, the friends say they would have raised more money upfront and contracted consulting from restaurant specialists or professional staffing agencies. Simultaneously growing a business and a competent staff is like parenting: along with joy and new discoveries, each phase presents greater challenges.

To grow effectively, healthy businesses need to adopt staffing strategies that meet current needs but also anticipate the future. Since Evergreen’s early days, Brooks says great people have been key to scaling growth without sacrificing quality. The founders gave intense focus to its corporate team in 2015, bringing on a COO and aggressively hiring HR, business development, IT and accounting specialists shortly afterward.

“There’s part art, part science to staffing the corporate team when your store count is growing,” said Brookes. “Sometimes you’re going to be a little heavier on the corporate overhead, and sometimes you’re going to be a little leaner.”

Attracting Engaged, Competent Employees

People are your company’s biggest asset, and engaged employees can give your business a huge advantage.

Finding and maintaining great staff requires a people-focused approach. As you develop short and long-term staffing goals, hiring should align with your business objectives.

Whether you want to expand certain sectors, launch new products, or grow online visibility, your hiring strategy should be totally in sync with these objectives. While you proactively work toward long-term objectives, temporary or contract staff may provide the essential support you need for specialized projects, seasonal rushes, or particular areas of expertise.

Evergreens strives to grow a brand that generates inbound applications versus actively recruiting staff. This means prioritizing a supportive, energizing work environment that includes above minimum wage pay, free employee meals for each shift, and $40 monthly bonuses for employees who lead healthy, active lifestyles.

Suddendorf says the company also makes a point of promoting employees to maximize unity and momentum:

 “About half our corporate team started in our stores.”