Payroll is generally one of the most important components of a company’s operating expenses. In service sectors, such as hotels and restaurants, payroll is generally the largest component. It is natural that, in times of scarcity, companies seek a reduction in temporary costs to survive. Sometimes these adjustments become permanent, generating greater profits for owners and investors.
This economic halt we are experiencing today is serving as an excuse for many companies to make cuts and adjustments. Since March, massive layoffs have been reported across the country in excess of 346,000. In Quintana Roo, official figures reach almost 64,000 people, being the entity with the most registered layoffs.
Despite the valid arguments that may exist from a business perspective, such as the viability of the companies themselves, what is impressive is the way in which those layoffs are happening. In the background, we must understand that these layoffs are of people, individuals, each with a personal history that is disregarded when carrying out massive and impersonal layoffs. Many of the cases reported in the media highlight the lack of transparency in the dismissal process.
On April 15, Edgar Félix, in his article for Luces del Siglo, details the maneuvers used by many hotels to account for payroll through outsourced companies, which apparently facilitates dismissals. However, there have also been companies that have endeavored to maintain as many of their employees as possible, as detailed by Félix as well. The discrepancy between one and the other is palpable.
There is no doubt that the legal system that regulates labor relations is part of the reason why many of these layoffs are so blunt. But it is not everything. “He who makes the law, makes the loophole,” goes the saying. As an executive, I understand the obligations that the law imposes to prevent abuses against workers, and this law owes its existence to a historical record of employer abuse. But the existence of that law has resulted in ways to circumvent it to reach similar results of abuse. When they are hired, workers are very often forced to sign an undated resignation letter as a requirement to start working, which facilitates an eventual dismissal – a totally illegal practice, although prevalent in our country. What has been recently reported are also forced negotiations that take advantage of the current crisis to impose unfair settlements under threat of starting an endless legal battles in case of not accepting.
However, all the companies affected today are where they are thanks to all those who contributed to the various phases of the business: customers, suppliers, but especially their employees. But the employees who “cost” less are actually the ones who most need their paycheck, more than those at the top of the pyramid. They have fewer personal and professional options. Their phones are not ringing asking them to join boards of directors or lead other companies. They cannot take advantage of liquidity solutions at the level that executives and large company owners can. They cannot create strategies to take on short-term debt that allows them to maintain their standard of living or even send a text message to their favorite banker to double down on their most recent investment.
Instead of that, how about empowering our employees for times like these with as much financial security as the leadership team does? Senior executives and business owners have greater luxuries than their workers. Luxuries of knowledge, contact networks and access to capital. That comes with responsibilities, a main one is to reduce the risk of loss of earnings and income. That responsibility also includes having to fire the people who supported the company on its way to success. The problem is that many managers, being obsessed with eliminating the short term risks in their financial reports, balance sheets and P&Ls, came to forget about the teams that allowed them to obtain all those luxuries.
Companies that survive the long economic slumber caused by COVID19 may be even better than before, much more efficient. On the other hand, the COVID19 situation also offers executives, directors and investors the opportunity to create real loyalty towards their companies based on the way they treated their most valuable assets: their people. Empathy attitudes will also contribute to higher future profitability. Entrepreneurs who treat their teams humanely will have much more credibility in the future thanks to their reactions in times like these.
So, why allow your critical assets to be laid off, especially in such inhuman way? When economic activity is fully reactivated, those same people who were fired without integrity or compassion will go to a competitor. Someday they may become a supplier, or a top executive for a competitor, and will not have forgotten how they were treated when things were difficult. Now is the time to give them the greatest reward, investing in our people beyond our legal obligation.