(Updates with latest layoffs in sixth paragraph.)
Shelter in place. Social distancing. Elbow bumping instead of handshakes.
No more shared boxes of pizza. Massive stockpiling. Obsessive washing of hands.
The new habits and lexicon of the American workforce reflect the vocabulary of the COVID-19 coronavirus that was first identified in Wuhan, China, in December and has spread globally, striking home in all 50 states and ushering in new habits and social awareness — along with fear and anxiety.
“The coronavirus crisis will have a profound effect going forward, especially in the insurance and benefits fields,” says Bill Gimbel, founder and CEO of Northbrook, Illinois-based LaSalle Benefits, a national insurance and employee benefits brokerage firm. “RIFs and layoffs will be the next ball to drop,” referring to the acronym Reductions in Workforce in corporate parlance.
Indeed, Bank of America on Thursday said the U.S. economy has already fallen into a recession, “joining the rest of the world, and it is a deep plunge,” the bank said in a sobering note to clients. “Jobs will be lost, wealth will be destroyed and confidence depressed.”
JPMorgan Chase said this week that it will temporarily close about 20% of its branches and reduce staffing in other branches, and restaurateur Danny Meyer's Union Square Hospitality Group laid off 2,000 workers, or about 80% of its workforce, signalling more pain ahead in the restaurant industry.
LaSalle Benefits’ Gimbel said a small client in the Chicago suburbs is already trying to figure out how to keep remote staff on their benefits plans, and looking at furlough plans that may keep them active.
Along with those tough choices, employers are adjusting to a new workplace normal where the office is now almost fully remote, which will usher in dramatic, long-term changes for U.S. employers that have been imagined for quite some time by workplace management experts — but never truly realized.
‘Seismic’ changes ahead
Welcome to Remote America, a world in the making that is constantly in flux, with widespread flex-time and WFH adoption, unexpected tech challenges for benefits professionals, greater emphasis on mental health benefits and attention from HR on a myriad of new issues.
“In terms of seismic activity that shakes us to our foundations, this has changed the culture of the country, the culture of the workforce and the mindset of the workforce,” says Gimbel, who has been in the benefits industry for over two decades. He says the COVID-19 crisis will be worse than 9/11 and the financial crash of 2008, when many employees were forced to change jobs or industries entirely.
“Everyone will already have, or have to build, the capability to go remote going forward. This is the new normal,” he says.
Perhaps one of the greatest fears, besides anxiety about the virus itself, is what happens if WFH turns into layoffs and the latest scary acronym: RIFs. To balance some fears, Gimbel noted that some industries such as employee assistance plan vendors, video conferencing companies, such as Zoom, or mortgage companies and brokers may see a ramp up of hiring to address increased demand for refinancing and other services.
Workplace experts said some insurance companies are starting to devise payment plans, deferred payouts and 30-day grace periods for some clients, which happened after the 2008 financial crash.
Michael Gradisek, the head of the benefits group at Philadelphia-based Duane Morris, said his employer clients have been asking mostly about the legal differences between layoffs and furlough, COBRA healthcare plans and compensation issues.
“Furlough is a term of art that is a temporary layoff, where we can keep staff on health, mental and vision, but those benefits depend on the insurance contract,” which is typically classified as unpaid leave, he says.
Benefits coverage is “case-by-case by each company and each contract. No good deed goes unpunished. What happens if we keep you on the plan, and someone ends up on a ventilator for two months? Those are the questions insurance carriers will be asking. That’s their job,” he noted from his home office, where he’s been in self-isolation since returning from a business trip from London.
Gradisek noted that in Europe, many of the bars and restaurants were open, and the crisis didn’t hit home for many Europeans until owners canceled the Premier League soccer games, similar to the NBA, NHL and preseason baseball shutdowns in the U.S. “My company said, ‘Glad you made it back. Don’t come in for two weeks,’ ” he says.
Their benefits practice has been “crazy busy and going berserk with calls” during the crisis, he says.
“Employers are starting to hoard cash, which is a smart thing. Can we voluntarily not make payments for executive comp plans and large payments? These are the questions we’re getting,” he says. “Some CEOs don’t want to take bonus money and put the company in a cash-strapped position.”
He noted various questions about delayed comp plans, and cited IRS code 409A, which does not allow for voluntary deferrals. “The IRS wants executives to take the money and pay the tax,” he says, noting that there are exemptions only if not deferring payments or paying bonuses may “jeopardize the solvency of the service recipient” or the company as a going concern.
“Is a million bucks going to stop the company from being a going concern? Employers are talking about it in reviews and discretionary bonuses. Those are all based on company and market conditions,” he says, noting one client that was weighing layoffs and reduction of certain staff salaries by 30%.
Telemedicine, communication plans
The Business Group on Health said employers are implementing a series of broad-reaching policies to support employees and their families as the coronavirus spreads. Initiatives include adding flexibility for remote work, enhancing health benefits to assure employees access to needed care, encouraging the use of telemedicine and EAPs, and continuing pay for affected workers.
“This may be the opportunity to promote telemedicine as a good option,” says Jennifer Benz, a senior vice president at employee benefits communications firm Segal Benz in San Francisco.
For many clients, the issue isn’t even having the telehealth options but often communicating those to staff, which often are not aware of existing offerings, Benz says. Benz noted three concrete things that smart companies are doing, including showing empathy, to establish trust with employees, she says.
Employers are more trusted than other entities right now. Employers need to own that role and know their people are looking to them for advice and counsel. “You can’t outsource trust to the CDC,” she says.
Employers also should ramp up communication, to avoid rumors and greater uncertainty. Finally, address employee questions and concerns immediately, she advises. “Keeping the dialogue open is the best way to earn respect and loyalty from your employees,” she says.
LaSalle’s Gimbel foresees a crash worse than after the 2008 recession, and long-lasting financial and psychological ripple effects ahead.
“The financial and human impact is going to be so much worse. We’re heading down a world of hurt,” he said. “Then you have the whole mental aspect of working alone in your home. What does that do to someone mentally?”
Remote work options also may take its toll. He noted one insurance carrier client that moved to an office-free model for six months to a year. Ultimately, Gimbel says, “the experiment didn’t work as they did not like not having a home base. It was too isolating. Some companies may find that WFH may be cost effective, but from an emotional, cultural, creative and team-building standpoint, there are still benefits to having a home base. There will have to be some happy medium.”
