Unlocking the potential of HR during economic uncertainty

Thriving During Economic Uncertainty

For startups and new SMBs, a recession or economic uncertainty may be the first time they’ve faced a downturn. As a result, some may stop doing what they did to get the company going, which is to attack the market. Failure to act decisively may open your business up to competitive pressures you wouldn’t usually have because you weren’t concerned about them before and were just doing your thing—running your business. To weather economic uncertainty, businesses may prepare before concerns hit by fortifying their HR operations:

Shift to variable cost model

One of the ways many companies may try to reduce costs at the first sign of economic instability is by layoffs. But there may be ways to reduce costs that don’t involve reducing headcount. Creating a cost model that enables you to look at outsourcing your human capital administration on a variable cost basis may help you to pivot quickly. This may be a better approach than going through layoffs. More on ways to do that later in this eGuide. With historically low unemployment, highly valued but demoralized employees retained through a layoff may easily find another job whereas before they may have not considered leaving. This may start a vicious cycle of lost productivity from critical staffing turnover, made worse since back-filling these may be harder than usual given current low unemployment. Moreover, the direct cost of terminating employees, such as potential payment of severance and vacation balances, and the lost productivity might have further economic implications, which may kick off another layoff cycle.

Focus on liquidity

Regularly monitor cash flow and build a cash reserve. For SMBs, liquidity may be one of the most important things to control and navigate during uncertain times. As an employer, your access to liquidity may be closely tied to your employee payroll obligations. Paying wages accurately and timely are important and governed by certain federal, state and local laws. If an employer fails to pay wages timely, it could potentially result in claims, costs, penalties and/or damages.

Diversify your banking

Your business may consider establishing additional financial risk mitigation by diversifying your banking deposits with different financial institutions. While diversification looks different for everyone and may require additional administrative effort, you may want to consider keeping deposits at multiple banks.

Develop crisis management and continuity planning

Your efforts in building a solid business continuity plan may impact your ability to navigate unforeseen crisis.

Business continuity planning is a fancy way of describing what you would do if your business is in jeopardy. With every crisis, you may encounter different challenges, but business continuity plans provide a framework to help minimize major stakeholder risks and allow you to keep your business running.

The value of your people

Even if businesses do what they should and are as prepared as possible, unexpected crises can still hit and take a toll on the company, leadership team and owner. Although it may seem contrary during a challenging economy, it is important for business leaders and their companies to think of the next great idea; to think about how to accelerate their concepts and about every part of what’s happening inside the organization. When you start to make decisions just to cut costs, you may lose your best talent. More mature businesses know the way to get through economic uncertainty is with ideas and talent.So, they may double down on growth. And that may become a challenge when you’re thinking about the cost of your people and not their value. If you consider lay offs without a plan, you may lose the value of your employees that have helped your business become successful.

The goal should be to balance the need for reducing costs with maintaining employee morale, engagement and productivity.

Maintaining your business growth in challenging times

While keeping your business moving forward is vital despite economic conditions, it doesn’t mean you can avoid having to make difficult decisions, among them layoffs. But there are steps to help you ensure that you are in a better position to weather the storm of economic turbulence and keep your employees’ morale and team cohesion from suffering. Again, the goal may be to balance the need for reducing costs with maintaining employee morale, engagement and productivity.

Finding ways to avoid layoffs may be beneficial as you watch for the economic climate to stabilize.

Layoffs

Look carefully at your financial situation and assess whether you should lay off employees. Holding onto valuable employees is good for the long-term health of a business, not to mention morale, so finding ways to avoid layoffs may be beneficial as you watch for the economic climate to stabilize.

Create more value for your customers, which may increase sales and your cash flow to keep your employees—who are probably crucial to improving your customers’ value and your revenues.
Consider alternative solutions before laying off employees, such as reducing hours, offering early retirement, or allowing employees to take an unpaid leave of absence or use their existing earned but unused paid time off.
Evaluate other expenses you might be able to reduce or cut that you can funnel to payroll to keep employees on staff.
Consider alternative sources of financing to help with cash flow.

Retain talent

You’re not alone in facing economic pressure and uncertainty. Your employees are encountering increased costs for everything from eggs to utilities due to inflation and other factors. While they might be satisfied to “just have a job,” there are still companies investing in people and filling openings even in tumultuous times. If you are facing a budget crunch or a hiring freeze and cannot bring new staff in, consider focusing on your current employees. During economic uncertainty, employees may need other perks than just a salary.

Benefits—Being able to offer your employees access to medical insurance and other benefits can alleviate some of the worries they may have about unexpected expenses.

Wellness programs—If you have an employee assistance program (EAP) as part of your benefits program, remind employees of its availability and any other wellness initiatives.

Financial tools—Offering financial tools as a part of your benefits and employee offerings, such as a retirement or 401(k) plan, can be a considerable asset for employees during troubling times. If your company has this type of program available, tell your employees how to access it. These are often overlooked resources that you can promote to your employees.

Intangibles—Flexible scheduling or remote work may be ways to boost employee morale and have them feel valued in the face of uncertainty.

One of the alternative solutions to consider during uncertainty is bringing in a professional employment organization to help you shift to a variable cost model and manage your HR administration.

Maintain employee morale

Uncertainty can be draining. It can mean long hours, late nights and tough decisions for business leaders. It can mean the same for workers, but without as much control over the situation. But there are ways to keep employee morale up despite the uncertainty and difficult decisions.

Communication is more important than ever. Employees are likely wondering how stable the organization is. Without this information, employees may begin to make assumptions. Be as transparent as possible.
Employees have great ideas regarding opportunities to increase savings and reduce costs. Turn to them for their input so they are invested in the company’s outcomes and success in weathering economic storms.
Offer opportunities for employees to develop new skills and take on new challenges. This will help them feel valued and engaged in their work.

Consider Outsourcing Your HR

Managing HR during the best of times can be a daunting task. Doing it during economic uncertainty adds an extra layer of complexity to go along with the regular functions of managing benefits, payroll processing, staying compliant and more. One of the alternative solutions to consider during uncertainty is bringing in a professional employment organization (PEO) to help manage your HR administration.

WHAT IS A PEO?

A PEO works with small and medium-size businesses to provide human resources support, payroll processing, access to benefits and other HR administrative services. An Inc. Magazine study found companies grow faster and more efficiently when working with PEOs, particularly during uncertain times.¹

SO, HOW DOES IT WORK?

A PEO provides support to you in a full range of HR functions that would otherwise be the responsibility of your business. Those may include:

Payroll processing
Access to benefits
Workers’ compensation insurance
HR consulting
Payroll tax filings
Risk mitigation

To help you with these HR functions, we work with your business under a co-employment model. As the business owner, you maintain your role as the worksite employer. You make all the decisions at your workplace, including hiring and firing, compensation, culture and more, and you allocate certain HR administration services to the PEO, the co-employer. As the co-employer, we also help you mitigate certain risks with a team of HR experts ready to help you professionally handle even the trickiest of HR situations.

A PEO, such as TriNet, can be a good choice for managing HR during an economic downturn by helping your company in reducing costs, increasing efficiency, providing access to benefits and HR resources, helping to reduce certain HR risks and improving focus. Of course, managing HR costs through a financial crisis has nothing to do with a business’s core mission. The founders didn’t get into the business to be the best benefits or HR administrator. Still, it is an essential part of the business, especially during uncertain economic times.

Working with TriNet has helped small and medium-size businesses in cost savings and ROI while the businesses could focus on what they do best. In times of economic uncertainty, spending wisely may help companies save money, stay compliant with HR requirements, increase efficiencies and keep employees engaged, setting the business up for short- and long-term success.

Reduced costs: By outsourcing certain HR functions to a PEO, companies may reduce the costs associated with in-house HR administration, such as payroll processing, benefits administration and required or optional training. This can help companies to maintain profitability during a recession and preserve cash flow.

- 84% of surveyed customers experienced cost savings in HR-related spending with TriNet.

Increased efficiency: PEOs have specialized HR expertise, allowing themto provide high-quality HR services more efficiently than in-house HR teams. This can help companies to maintain or improve their HR service level, even during a recession.

-98% of surveyed customers reported considerable or moderate time savings working with TriNet.³

A PEO, such as trinet, can be a good choice for assisting you to manage certain HR functions during an economic downturn by helping your business reduce costs, increase efficiency, shift to a variable cost model, access benefits and resources, mitigate hr related risks, and improve focus.

Access to benefits and resources: PEOs often offer access to benefits and resources to their clients, such as health insurance, retirement plans and training programs. These resources can help companies to attract and retain employees during a recession, even if they cannot offer competitive compensation packages.

– 67% of surveyed customers said they gained access to greater benefits through TriNet.⁴

Mitigate risks: PEOs can help companies to mitigate certain HR risks associated with HR administration, such as providing HR best practices on employment-related compliance, laws and regulations. By outsourcing certain HR functions to a PEO, companies can have greater confidence that they are on top of employment-related compliance with relevant laws and regulations, even during a recession.

– 95% of surveyed customers agreed they were able to gain peace of mind with respect to HR compliance with TriNet.⁵

Improved focus: By outsourcing certain HR functions to a PEO, companies can free up their in-house HR team to focus on other strategic initiatives, such as talent management and employee engagement. This can help companies to remain competitive during a recession and emerge stronger on the other side.

– 98% of PEO clients would recommend a PEO to a small business colleague.⁶

During troubling times, everybody’s looking for a silver bullet. Everybody’s looking for the best thing to do. One of the biggest risks in any business is thinking there’s some magical answer to these problems.

Surviving in a time of financial uncertainty is about being educated, making decisions and still taking some risks. It doesn’t mean you won’t have to make hard decisions. What you should consider not doing, though, is damage your fundamental vision, mission and values while cutting costs by reducing headcount. A thoughtful, strategic approach to your overall business and your HR operations can position your business to not only survive but thrive regardless of the economic climate.

Over the past three decades, TriNet has supported businesses through plenty of rocky times. We know it can be an anxious time, but we also know there are things you should consider to protect your HR operations. Learn how TriNet can help your business at TriNet.com.

_{1. Industry Statistics - NAPEO Accessed March 30, 2023}

_{2. See How TriNet Adds Value and Helps Scale Your Business | TriNet. Accessed March 30, 2023}

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_{6. https://www.napeo.org/docs/default-source/member-resources/white-paper-7-the-roi-of-using-a-peo.pdf?sfvrsn=d2c52ed4_10. Accessed March 30, 2023}