Your Business’ Rapid Response to COVID-19 Part 2: Employees

In Part 1 of our blog series on responding to the COIVD-19 crisis, we discussed government programs and resources that are available.

In Part 2, we are focusing on the heart and soul of every business — employees. 

Your employees are likely feeling the emotional toll of this crisis. Providing strong leadership now, more than ever, is important.


Trying to retain all of your employees may become increasingly difficult and you may find that layoffs are necessary. The cost of employees extends far beyond payroll. Benefits, supplies, utilities, consumables, etc. all add to employee overhead.

Some small businesses are struggling with the decision between a layoff (a permanent termination) versus a furlough (a temporary leave of absence where employees may retain their benefits and return to work without losing their positions).  Administratively, layoffs are easier to manage than furloughs, especially given the unknowns of the current situation.

You should consult with your legal counsel before a layoff or furlough, especially if you have collective bargaining arrangements.


You should be communicating with your employees on a regular basis. With a remote workforce, it is easy for employees to feel detached. Provide updates to your workforce about the changes you are making to deal with the current crisis and how these changes will directly affect them.

Keep your laid off workers in the communication loop also and provide regular updates and information that include:

  • Links to benefits and resources available to them
  • Let them know they are on the “list for recall”
  • Don’t provide a timeline unless you can keep it
  • Be factual and candid 


Some companies may choose salary reductions or conversion to hourly pay with reduced hours for exempt employees. These tactics can prove quite beneficial. However, how you utilize your employees may require you to make many other changes.

Be cautious when using exempt employees to perform non-exempt duties. While this could help you in the short run, you could find yourself in trouble in the long run. Case law has proven that when using exempt employees for non-exempt jobs, these employees are entitled to overtime, meal periods and breaktime.

401k PLANS

To help you maintain cash we recommend you suspend discretionary matching to 401k plans. However, there are specific rules that must be followed when doing so, including a required 30-day notice during which you must continue contributions. You will still need to conduct your Actual Deferral Percentage (ADP), though it is not due until January 2021. You will also need to file your 5500 form.

Discretionary matching can be reinstated, and contributions can be made whole by the end of the year, if this is feasible.

One important reminder – the cash you are withholding for employee 401k contributions must continue to be remitted on time which, for most plans is five days. You cannot hold these funds back as part of your efforts to maintain your company’s cash. Doing so can result in harsh penalties.


The Federal government, as well as many states, is offering assistance programs to employers who continue to pay their employees either their regular wages or with emergency sick leave and/or emergency FMLA payments.

There are also programs to help layoff and furloughed workers.

PBO Advisory Group’s COVID-19 Resources Center has links to various programs.


We will soon be passing along information to help you with your cash flow planning and immediate steps you can take.


These are trying times and while we are physically distancing, we must all stay socially connected. PBO Advisory Group is here to help you. Please contact us with any questions you may have.