21 Apr The COVID-19 Pandemic and Business Payroll
Experts such as Tony Calvacca, managing partner at The NYBB Group, believe that the businesses that survive the COVID-19 pandemic will be positioned to do very well. Of course, grabbing that pot of gold at the end of the rainbow does mean that a business has to weather the COVID-19 storm. The BizBuySell article entitled, “COVID-19 Stalls Q1 Transactions: Presents Once in a Lifetime Opportunity for Acquisitions,” has some smart suggestions that all businessowners should hear at take to heart. As your clients will be looking to you for advice and guidance during this period, let’s take a look at what they should be doing to navigate this pandemic successfully.
In an emergency situation, which for many businessowners COVID-19 certainly qualifies, it is necessary to step back and access the situation with as little emotion as possible. Your clients need to ask themselves, “What steps does my business need to take to make it through the next few months?”
For most businesses, payroll ranks as one of the single greatest, often the greatest, financial commitment. With this in mind, it is of course, not surprising that thousands of companies have drastically cut their payrolls. The author of the BizBuySell article notes that 41% of surveyed owners are furloughing employees with reduced hours or pay. But a bit of good news for employees in this dark situation, is that only 7% of owners have fired employees outright with no intention of hiring back.
It could be possible that the huge spike in unemployment rates could be, at least partially, temporary. There is a general view amongst owners that you have to take care of your employees as they are the foundation of your business. Without employees, there is no business. With that stated, however, your clients must make sure that their business remains operational long enough for the COVID-19 situation to be resolved. The goal, of course, is for businesses to hire their employees back and get their business back on its feet.
As you are likely already aware, one possible avenue of assistance for businessowners is the SBA’s Paycheck Protection Program. Through the PPP, it is possible for businessowners to borrow up to 250% of their average monthly payroll expenses over the past year. PPP loans are 100% guaranteed by the federal government and can even be completely forgiven. At the time of the writing of this article, there are problems getting money into the hands of businessowners. But you should proceed as though these problems will be worked out and apply. According to the article, a whopping 70% of surveyed owners familiar with the PPP are expecting assistance from this program. The keyword is “expecting,” as for most businessowners there is, as of yet, no guarantee that the checks will indeed arrive.
Businessowners have little choice but to proceed as though government funds are not arriving until they actually do arrive. Cutting payroll, as problematic as it may be, is often the only answer in many situations. In the end, companies need to make certain that their employees have a business to come back to. This will potentially avoid longer term unemployment and life disruptions. At some point, businesses may have to make a tough call and decide whether to furlough employees, especially if federal aid fails to materialize.