Friday, September 29, 2023

Preparing payrolls for the approaching recession

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Shreya Christina
Shreya has been with for 3 years, writing copy for client websites, blog posts, EDMs and other mediums to engage readers and encourage action. By collaborating with clients, our SEO manager and the wider team, Shreya seeks to understand an audience before creating memorable, persuasive copy.

Daniel Altman is the chief economist at Instawork.

No two recessions are the same, so managing the labor market on the eve of an economic downturn is tricky at the best of times. For hiring managers who want to do good for their employees while protecting the bottom line, figuring out how to modulate part-time and full-time payrolls can be a daunting task. How will it be this time?

One of the most dynamic parts of the workforce during recessions is part-time work. It is dynamic because of the churn: workers who were part-time in the beginning may lose their jobs, while employees who were full-time may be temporarily shifted to part-time work. Striking the balance between part-time and full-time employees is a huge challenge for hiring managers, especially as the economic situation changes day by day.

Learning from past recessions

Looking back at the past several recessions, we see some pretty clear trends. The total number of people classified by the Census Bureau as usually works part time only rises in deep recessions such as in 1981 and 2008, and then only when the recessions are a few quarters old. But the Census Bureau also asks about people who work part time for economic reasons— in other words, because of the business cycle. This number has risen sharply with each recession since the 1950s.

There is no better illustration of this disjunction than the recession that started with the Covid-19 pandemic. Between February and April 2020, the number of people working part-time for economic reasons increased by 6.5 million, or about 150%. But the total number of part-time workers has apparently fallen by more than 8.5 million, a drop of more than 30%. So companies massively laid off their part-time workers, and companies also massively switched full-time workers to part-time workers.

This time it’s different

When faced with an unprecedented economic challenge, it’s not surprising that companies somehow tried to retain their full-time employees and were more likely to let their part-time employees go. But what happens if the economy now enters a recession?

It will surely be different. For starters, there just aren’t that many part-time workers to fire. The number of people who usually work part-time is still more than 2 million below the total in February 2020. This is in stark contrast to the number who usually work full-time, i.e. higher now than before the pandemic, with millions of positions still not filled in.

With talent that is still very popular and a mild recession (paywall) that many economists anticipate, companies may want to keep their full-time payrolls intact. Given the large number of vacancies still present in the labor market, it would be a risky step to move full-time workers to part-time work; some of them may prefer to leave for a full-time job elsewhere. But if part-time payrolls are already thin and full-time payrolls untouchable, where does the adjustment come from?

I predict that companies will remove as many part-time workers as possible from the payroll and exchange them for flexible workers who can be deployed on demand. Companies may also choose to staff a number of full-time positions with a flexible workforce on long-term assignments. The ability to book shifts and longer-term contracts at short notice offers unprecedented flexibility as companies respond to changing demand. And for the workers who lose their jobs, flexible work will be a way to replace lost income and build relationships with other employers.

Preparing for the future

So how can companies prepare for this change? Here are a few ideas to consider implementing:

• Be specific with your job descriptions. The key to success with flexible work is driving the best match between employees and companies – and for that, employees need to be aware of your company and your expectations. They also need to know which skills and experience are most useful in the job.

• Train your employees in advance. Offer advice on dress and ability requirements, as well as the work environment, before their shifts begin. Where possible, post information about arrival procedures and work processes. Videos are the best.

• Create a workplace that is flexible-work-friendly. Ensure that employees can enter the workplace and clock in easily. Post the information they need for their services so they have it as soon as they come in. Make tasks and even workspaces more modular so that productivity doesn’t suffer if you don’t always have the same employees on site.

These ideas may seem new now, but I think they will become an accepted practice very soon. Traditional forms of part-time work are beginning to disappear, as both employees and companies opt for flexibility. A recession will only accelerate the trend. Business Council is the leading growth and networking organization for entrepreneurs and leaders. Am I eligible?

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