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COVID-19 Business Continuity – 24th March

Hi, it’s Ashley Thomson with the update for Tuesday 24th March.

In today’s briefing:
1. Business Shut Down: 3-point plan for staff costs
2. Business Slow Down: 3-point plan for staff costs

In this briefing I’ll be talking about shut downs and slow downs so I want to explain the difference between them.

Shut down is what happens when the government mandates that certain services are no longer allowed. Businesses that provide those services as their normal course of business are shut down. Shut down can also occur when a business is unable to trade due to a stoppage of work for any cause for which the employer cannot reasonably be held responsible.

Slow down is when your business experiences a decrease in demand for your services and as a result your revenue drops off.

Whether your business is affected by a shut down or a slow down, your revenue will be hit but you will continue to have costs such as staff, rent, and other overheads.

For many businesses, labour is one of the largest costs so in this brief I’m looking specifically at how to reduce staff costs in the event of a COVID-19 shut down or a slow down.

Speak with a coach and business advisor before taking any action because they will be able to assist you with weighing up the various options and can direct you to a professional legal opinion.

1. Business Shut Down: 3-point plan for staff costs

Step 1. Reduce staff costs

If your staff can’t do any useful work, there are provisions in the Fair Work Act to stand down employees. Please be aware that different awards have different provisions. In the case of a stand down, you stop paying employees but they still stay in your employ until the stand down is lifted. During a stand down, staff continue to accrue annual leave entitlements.

It is important that you comply with the Fair Work Act when enacting a stand down. I feel it’s important to note that standing down employees is NOT the same as making roles redundant. There are very different provisions and procedures that must be followed if a staff member is being made redundant. And for some businesses there are costs associated with redundancy, which is what we’re trying to avoid at this stage.

I have attached a template to stand down a staff member – COVID-19 Employee Stand Down Template

And here’s the link to Fair Work Australia for your reference: https://www.fairwork.gov.au/how-we-will-help/templates-and-guides#stand-down

Step 2. Communicate

Inform your staff that their roles are being stood down, not made redundant. Let them know that you’ll keep reviewing the situation and that you’ll keep communicating with them during the stand down.

You may want to let staff know that government financial support may available. I recommend that you refrain from giving advice and instead direct them to the appropriate website: https://www.servicesaustralia.gov.au/individuals/subjects/affected-coronavirus-covid-19/people-who-dont-get-payment-from-us-coronavirus-covid-19

Step 3. Review your financial model

Update your financial model to reflect the reduced expense of wages and associated on-costs. Once you have a revised view of your financial model, you and a coach will be in a better position to assess your position and plan out the next stages for shutting down your business.

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2. Business Slow Down: 3-point plan for staff costs

1. Reduce staff costs

Reduce your staff’s work hours. Several businesses I’m speaking with have been affected by a general slow down and have decided to reduce to a 4-day week, Monday to Thursday.

Consult with your staff and gain a mutual agreement that hours will be reduced and salary will align with the reduced hours. The consultation and mutual agreement of reduced hours are conditions of many awards and enterprise agreements the Fair Work Act, so make sure you comply with the regulations.

As an employer, your ability to vary hours and/or rosters will largely depend on the award or contract that applies to your employees. Some awards and contracts require employee consultation in order to alter work arrangements, so ensure you are familiar with the obligations as they apply to your workforce.

2. Communicate with your staff

Explain to your staff that a reduction of 20% of wages is not going to mean 20% less in their pocket. That’s because the higher the pay, the higher the tax rate.

Let your team know that this is a necessary measure, and that it’s possible that you’ll need to take further actions if the slow down continues.

Beware of the risk of a fair work claim; employees who feel badly done by are more likely to make a claim with FWA. The last thing you want is to be penalised with a payout of 6 months of wages because you cut corners and didn’t follow the correct procedures properly.

https://www.fairwork.gov.au/how-we-will-help/templates-and-guides#roster-changes

3. Modelling

Update your financial model to reflect the reduced expense of wages and associated on-costs. Once you have a revised view of your financial model, you and a coach will be in a better position to assess your position and plan out the next steps for your business.

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There will be another government announcement after the national cabinet meeting this evening. So stayed tuned.

Tomorrow’s update will include an action list for you to implement in the event that your business will be shut down.

Ashley

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