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Was Furloughing Employees the Only Option Retailers Had Amid the Coronavirus Crisis?

As the coronavirus continues to slam the retail sector, an increasing number of companies have resorted to furloughing a portion of their workforce — a measure they have suggested is necessary to keep their businesses afloat.

Hundreds of thousands of workers have been placed on temporary unpaid leave, retaining their benefits but no longer receiving paychecks from their employers. Many are counting on financial relief offered by a massive coronavirus stimulus package passed in late March that promises unemployment pay and benefits for struggling Americans.

“I don’t believe furloughs were ever accepted as an unemployment option, but the rules have changed [with the coronavirus crisis], and we’re now seeing this become a popular option for companies all across the board,” said Tana Greene, CEO of employment solutions firm MyWorkChoice.

Still, the cost savings employers achieve through furloughs could be somewhat offset by the economic and psychological toll their implementation places on workers. The situation inevitably raises the question: Were there other alternatives? Here, FN explores the options afforded to retailers amid the health crisis.

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Assigning shorter workweeks

From German sportswear giant Puma to fast-fashion retailer H&M, a number of retailers have announced shorter workweeks for thousands of employees, as they face declining sales and less traffic because of the pandemic. In the United States, employers can adjust the shift times or cut the hours of nonexempt employees so long as they continue to pay workers above the minimum wage. Exempt employees, however, need to be paid their weekly salary if they perform any work at all during a given workweek.

Implementing pay cuts

A number of top executives and other senior leaders at several companies have opted to forgo their salaries or receive reduced pay for an undetermined time during the crisis or even for the entire fiscal year to keep businesses and many of their workers’ jobs intact. In addition, some members of the board have also agreed to a temporary suspension of their retainer fees. Some of these pay cuts also extend to certain associates, including director-level employees and those in managerial roles.

Cost-saving across the workforce

Many companies have opted to temporarily eliminate certain investments in their workforces: Some have put a pause on hiring efforts, redirecting money that would have been allocated to new roles toward their businesses. On the other hand, other companies have suspended nonessential overtime pay, and they’ve eliminated or deferred bonuses across their ranks.

Participating in work-share programs

For workers whose hours have been reduced, the $2 trillion stimulus plan provides incentives to states to adopt work-sharing programs where possible. Currently, work-sharing laws already in place in about 29 states, plus the District of Columbia. The program involves mandating that workers reduce their hours and share duties with others who are similarly situated. This way, all employees will be able to receive unemployment compensation while working part-time.

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