One of the most frequently asked question we receive from business customers is whether the business should lay-off some or all of their employees, or when should they do so?
This is a difficult question and there are not necessarily absolute conditions or answers that apply to all businesses. I therefore answer by suggesting a number of the criteria to be considered in making the decision, and also suggest some possible options.
Criteria (in no particular order):
1. How long to do you expect the layoff to be effective for?
2. What are the financial conditions of the business?
a. Cash reserves
b. Number of employees and overall payroll
c. Other financial commitments
d. Estimated coverage of cash reserves to overall commitments
e. Other financial factors
3. Number of employees?
4. Will the employees return to work if laid off?
5. Should or can the layoff or other arrangements be applied to all or a select group of employees?
6. Businesses accepted moral obligations to its employees?
7. Integrity of the business owners in applying these types of decisions?
Options:
1. Layoff and issue Record of Employment (ROE)
a. Employee can apply for EI benefits (see our bulletin on this topic)
b. Employee will suffer some financial hardship as EI benefits are approximately 55% of regular income.
c. Be careful when completing the ROE to ensure that the employee can get benefits as soon as possible. (see attached appendix from the Canadian Payroll Association)
2. Establish a Supplementary Employment Benefits (SUB) plan
a. Employee applies for EI benefits
b. Employer is permitted to top up income of the employee up to 95% of regular income
i. see attached appendix on establishing a SUB plan
c. Employee is kept close to whole
i. EI benefits plus
ii. Top up from employer
d. There is a cost to the employer, but employee loyalty is enhanced
Other considerations
1. Legal obligations
a. The business may be liable for additional compensation to employees
b. Employment standards suggest minimum potential liability
c. Employment law precedents may be higher than the minimums under employments standards
d. Highest potential exposure is to long term employees
e. We suggest you consult with an employment lawyer in this regard
The decision that each particular business will come to will be arrived at after considering the suggestions above, as well as others that are relevant to their business. We are able to listen and assist you with some guidance as you require.
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