Retail Store Closures: Practical Steps for Standing Down Staff or Ending Employment due to Coronavirus.

For Retailers other than the lucky ones like supermarkets, fresh food outlets, greengrocers and essential services, dwindling store traffic and safety concerns for employees have meant a majority of retailers have or will have to shutter stores and stand down staff to survive.

This article is general practical advice based on discussions with 2 large retailers and references to legislation.  Each retailers’ circumstances will be different and you should seek out your own advice from employment lawyers or your industry association to support your decisions. At the end of the article, I have listed out various resources available.

Survival Steps:

1.     Cashflow: How long can your business survive based on your current cash flow adjusted for lower sales, current and committed stock levels, negotiated rental & expense deferral and survival wages (normally for eCommerce teams, social media marketing and merchandising). This analysis gives you a realistic understanding of how long you can survive and the maximum wage bill and staff numbers you can employ.

2. Staff Numbers Reduction: The process and order of letting go of employees for most retailers will be based on minimizing cash outlays and so the order is typically

• Casual Staff First
•  Part-Time & Full-Time Staff during their probationary period normally during the first 6 months of employment. You will be obliged to give proper notice and pay entitlements such as holiday pay accrued.
• Part-Time & Full-Time Staff employed for less than 12 months. You will be obliged to give proper notice and pay entitlements such as holiday pay accrued. Redundancy payments accrue after 12 months of employment.
• Contractors: based on the contractors written agreement you will normally be able to terminate the contract with due notice and no further liability
• Part-Time & Full-Time Staff employed for more than 12 months. You will be obliged to give proper notice and pay entitlements such as holiday pay, long service leave accrued. Redundancy payments normally accrue after 12 months of employment. For details see https://www.fairwork.gov.au/ending-employment/redundancy/redundancy-pay-and-entitlements#2045-2049. Small business employers don’t have to pay redundancy pay under the Retail Award.

3. Standing Down Staff:

Employers may be able to stand their employees down without pay during the coronavirus outbreak for a number of different reasons. These can include where:

• the business has closed because of an enforceable government direction relating to non-essential services (which means there is no work at all for employees to do even from another location)
• a large proportion of the workforce is in self-quarantine meaning the remaining employees can’t be usefully employed
• there’s a stoppage of work due to lack of supply for which the employer can’t be held responsible.

Importantly, employees can be stood down without pay under the Fair Work Act if they can’t be usefully employed because of a stoppage of work for any cause for which the employer can’t reasonably be held responsible. Employers should exercise the option to stand down cautiously because if they stand down their employees unlawfully, they will likely be able to recover unpaid wages.

Enterprise agreements and employment contracts can have different or extra rules about when an employer can stand down an employee without pay, for example, a requirement to notify or consult. Employees that are stood down remain employed during the period of the stand down.

4. Retaining Staff - JobKeeper

The Australian Federal Government on the 30th March 2020 introduced a subsidy program for 6 months designed to cover the cost of their employee's wages up to $1,500 a fortnight per employee so more employees can retain their jobs and continue to earn an income.

To be eligible a retailer and suppliers

• With a turnover of less than $1billion need to demonstrate their revenue has reduced by more than 30%
• With a turnover of more than $1billion need to demonstrate their revenue has reduced by more than 50%

You can register at https://www.ato.gov.au/general/gen/JobKeeper-payment/ and for more details on which employees are eligible see https://treasury.gov.au/sites/default/files/2020-03/Fact_sheet_Info_for_Employers_0.pdf

5. What staff do you Retain

The world has changed and so will retail at the end of this crisis. What's certain is that it would be a brave retail executive who would expect retail to go back to normal after the crisis.

The coronavirus will accelerate the changes consumers are driving towards a "new retail" structure. At the very least we would expect a longer-term decline in revenue for a large number of retailers which means a substantial restructuring of their business model and store numbers.

When things settle down in a few weeks, senior executives will need to restrategize and reinvent their businesses to the future- less revenue, fewer stores, changed consumer behavior, less discretionary spend, depleted savings, etc. To date our retail executives have been reluctant to restructure other than at a superficial level, now they will have no choice.

The $1,500 per fortnight which is equivalent to $39,000 on a per annum basis will help retailers keep their core store operations team together and we commend the government on this.

The key battle moving forward is to identify and attract talent to the business, which starts with the strategy and then putting in place a team for the future. The question for Retail CEOs is how many of my management team are equipped for the tough road ahead requiring a different skillset?

Summary:

From the chart below you will see that employing staff in a retail environment is complicated. Letting them go or standing them down is no less complex.

Business survival will determine your strategy and is made more difficult because of retail's unpredictable future. Be cautious and frugal to reserve cash and give your business the best chance of coming out the other end as one of the survivors.

See also my article in Ragtrader