Coronavirus impact: More businesses adopt salary cuts, lay-offs to survive

As the coronavirus pandemic sweeps through the world with its resulting impact threatening the survival of businesses, more and more companies operating in Ghana say they have no option than to jettison staff or, at best, cut their salaries in order to keep their businesses afloat.

With the local tourism and hospitality industry, alongside the education sector, grinding to almost a halt, with its attendant job cuts and reduced salaries, many more businesses in other sectors are exploring these options in order to sustain operations until a vaccine is found or the virus is brought under absolute control.

A survey conducted by the Delegation of German Industry and Commerce in Ghana (AHK Ghana) and the Chamber of Commerce and Industry France Ghana (CCIFG), has revealed that halt in recruitments, cancellation of bonuses and salary increases, and lay-offs are among the immediate steps that companies have taken or will take to remain in business.

The survey shows that, of the 22 companies which responded to what immediate action they would take with regards to lay-offs and salary cuts, seven of them said salary cuts were necessary; five said lay-offs are necessary and ten responded that no lay-offs have been planned.

To further contain and cut cost, some of the companies said they have revised payment terms with clients and cut investments and travel as well. Others say they will weigh the option of funding salaries and other expenses through loans.

For many of the companies, government support at this time in the form of tax incentives and charges, including import taxes, and postponement of employer contributions to Social Security and National Insurance Trust (SSNIT), and taxes to the Ghana Revenue Authority will contribute greatly to their survival strategy.

Some of the companies said even if they would not need support from government, their partner companies, suppliers, clients, or the sector within which they operate, may still need the support of government to survive the turbulent times they are going through as a result of the pandemic.

When the companies were asked by the survey what is the most severe impact of the pandemic on their business, 49 companies out of the total 77 interviewed, reported of high impact, which ranges from reduction in demand for products and services, delays in payments, facility closures, among others.

The 77 companies operate across different sectors namely: chemicals; commerce; construction/engineering; financial and professional activities; food, beverages, and agriculture; hospitality and tourism; oil, gas, and mining; tech, IT, communication; transport and logistics; and utilities.

What is happening elsewhere?

The companies captured in the survey are not the only ones reeling under the pressure of the virus. The country’s hospitality and tourism industry can be said to be the hardest hit so far. According to the Ghana Tourism Federation (GHATOF), about 800,000 jobs have been affected in the sector due to the pandemic. The hotel industry alone, is said to need an estimated GH¢324 million monthly as stimulus package in order to keep jobs and the business running.

Besides the hospitality and tourism industry, another sector that has been affected miserably is education, specifically, private schools. The Conference of Heads of Private Schools (CHOPSS) has called on government to include them among organisations that need stimulus, else it will be difficult for them to rise again after the pandemic.

CHOPSS say due to the ban on social gatherings, which include schools, most of its members were unable to pay salaries of staff for March and April 2020 and the same thing is set to happen this month (May) as the ban has been extended to end of the month.

Even the media has also not been spared the rigours of the pandemic as advertising revenue has declined significantly reflecting the challenges businesses are going through. Just last week, news broke that media giant Multimedia has laid off about 100 workers to ease pressure on its payroll. It is reported that similar actions are being contemplated by other media houses in the country.

Several businesses, especially from the informal sector, have also been greatly impacted by the pandemic. Many traders are unable to replenish their stock due to restrictions on movement of people and closure of trade borders across the globe. Others have also lost their jobs and means of livelihoods or had their incomes shrunk significantly as people are now more cautious about patronising or consuming certain goods.

For example, due to bans on social gatherings, make-up artists, hair dressers, seamstresses and tailors, event organisers, decorators, graphic designers, caterers, and other related ancillary service providers have either ceased operations or had demand for their products reduced drastically, some to near zero. Staff from all these small businesses have been asked to stay home, in almost all cases, without any salary.

It must be noted that the coronavirus pandemic’s impact will cut across all sectors of the economy irrespective of how robust they are. For example, the banking sector, which quite recently went through some reforms and have come out strongly afterwards, is set to face some major disruptions in their activities too.