COVID-19-struck zero-revenue businesses considering half-pay or no-pay leave if curfew continues

With most businesses suffering from the partial shutdown of the country and economy as part of mitigation measures against the spread of COVID-19, companies are considering half-pay leave or no-pay leave if curfew continues for much longer.

With the country marking near three weeks of partial shutdown except for essential services and select export companies, most businesses are suffering from zero revenue or insignificant income, causing a serious cashflow crisis. For these businesses, the Government-enforced Work from Home initiative is not helping either, with growing fears over how April salaries can be paid with zero or dismal revenue.

There is consensus that stemming the spread of COVID-19, which has killed seven people so far and infected nearly 150, is important, but there is also a growing view that economy or businesses cannot be shut down too long whilst owners are expected to pay salaries as usual. “The issue is no revenue generation owing to the curfew and the partial shutdown. The longer this status quo persists, the bigger the problem will be end of the month,” it was opined. In certain COVID-19 affected countries employees inactive due to the shutdown are treated "unemployed."

“If the curfew and partial shutdown approach continues for few more weeks, lot of companies will face serious problems in paying salaries,” a business leader told the Daily FT.  ”Yes, debt moratorium will help to reduce costs, but salaries have to be paid irrespective of the work from home arrangement, and how to pay sans regular revenue is the issue,” he added.

Whilst most companies have paid March salaries, despite two weeks of shutdown or work from home initiative, the financial capacity to pay salaries in April is seriously undermined, another business owner said. “Continuity of curfew and partial shutdown will force owners to take a drastic decision of letting employees stay home (working or otherwise), subject to paying only half of their salaries or no-pay,” he added.

There is consensus that stemming the spread of COVID-19, which has killed seven people so far and infected nearly 150, is important, but there is also a growing view that economy or businesses cannot be shut down too long whilst owners are expected to pay salaries as usual. “The issue is no revenue generation owing to the curfew and the partial shutdown. The longer this status quo persists, the bigger the problem will be end of the month,” it was opined.

Several large companies such as John Keells, Brandix, and Softlogic, as well as SriLankan Airlines, have announced pay cuts ranging from 5 to 35% for executives for three months.

Paying the usual salary for the remaining employees will continue to be a big burden unless the situation improves for the better sooner than later.

Private sector analysts point to several initiatives in COVID-19 impacted countries, where the Government is undertaking to pay in full or 80% of salaries of non-executive grade employees. However, they are also mindful that the Government too lacks the fiscal space to enact such policies in Sri Lanka. The tourism industry, which is among the worst-hit, has made a similar appeal.

Greater clarity on the way forward in terms of pay in a continuous shutdown is likely next week, and private sector expect the Government to step in and extend support despite its own challenges, due to the sensitivities over salaries and job security by employees.

The Government has been commended for addressing the plight of the self-employed and those surviving on daily wages as well as poor families by granting Rs. 5,000 to over 4 million families, though questions have been raised for how long this can be continued, and whether the recipients will be content.