What will happen to talent after the Paycheck Protection Program forgiveness period ends?

What will happen to talent after the Paycheck Protection Program forgiveness period ends?

May 2020

Written by: Kelly Renz, President & CEO

For organizations with 500 or fewer employees, the Paycheck Protection Program (PPP) was a short-term lifeline.  Designed to provide forgivable SBA loans to businesses while preserving employment levels, the funds have a number of conditions that are going to become quite sticky for companies to navigate.  This has led to much speculation that there will be a “round two” of employment impacts come June and July.

What will organizations face after PPP?

Economic recovery predictions are all over the map and it’s hard to determine what will really happen.  There is just too much variability ahead yet to know for sure. However, companies will still need to make operating decisions with the information they have available.  That said, as the PPP periods end – the eight weeks of general payroll protection guidelines and up to June 30th for employment reinstatement levels – there are likely to be additional furloughs, layoffs and/or restructuring as the financial support begins to dwindle again for slower-to-recover organizations.

With the PPP restrictions about workforce reduction calculations, work schedule modifications and other guidance about how to treat workforce pay structures, organizations will be facing the next set of talent decisions between their eight-week post-funding period and June 30th key dates. 

It is critical for your organization to understand all the financial impacts that other government programs may have as well, such as the Families First Act, unemployment, and other leave programs.  By understanding these, you will be able to build the necessary financial scenarios.

How can you make sure you position your talent right?

Under the current circumstances, you need to make decisions quickly related to talent.  Your business is under pressure to preserve cash and it is common that talent is one of the top expenses.  Therefore, it’s always one of the first expenses scrutinized when cost-cutting is required.  Here are things you can do to ensure you are data-ready for talent decisions:

1) Calculate your headcount and payroll needed for the forgiveness eligible part of your PPP loan.  Then look at the LOA benefits as well under Families First, including both the two weeks of sick pay and the childcare leave benefits for those that would be eligible.  These will give you insights into the overall financial impacts.

2) Evaluate your cash flow for the four months following your PPP loan eight-week expiration period.  What do you need to keep your company afloat?  What levers do you have to help extend cash.

3) Identify your top performers who will be able to weather the broadest spectrum of business needs.  You must prioritize your workforce with that are most flexible and adaptable, and focus on retaining that talent.  We recommend looking at talent needs in three scenarios in order to be prepared to provide guidance for decisions: 

  • If business declines another 20% by end of Q2 2020
  • If business improves 50% from where it is now by end of Q2
  • If business returns to pre COVID-19 levels at 100% by the beginning of Q3 2020

4) If you plan to rehire and/or bring other talent back to your organization, you will be competing with many other organizations doing the same.  Talent will not necessarily be loyal depending on how they felt about the departure.  Although a more gradual business recovery is predicted, you need to plan for what happens if you need to hire again, and then train new employees, considering you likely have reduced HR and recruiting resources.

5) Use Data to make your decisions on talent.  Organizational DNA is measured through a strategic assessment process.  Using data from assessment tools that measure natural behaviors, motivators, capabilities and how individual’s operation under different stresses and circumstances, you will gain insights into how to best position your talent.  This goes beyond the “right person, right seat”.  Organizational DNA insights will drive “right person, right seat, right development plans, right team dynamics, right time, right outcome”.  We think of measuring Organizational DNA like that of taking an MRI vs. an x-ray – you just get more in-depth information to make critical.

Organizations that are most prepared will weather this storm the best.  Take the time now to provide scenario alternatives to your leaders to ensure you do not fall behind the changing and bumpy road ahead.