The cascading impact of COVID-19 on employers

12 August 2020 Elna Van Wyk, Head of Group Disability Management and Underwriting at Momentum Corporate

COVID-19 has brought unprecedented disruption and destruction to not only our lives but the life of our economy. For the month of May 2020, Stats SA reported that 25.8% of companies reported laying off staff for the short term. Even worse, 80.2% of companies reported that up to 20% of their employees have been retrenched.

Dealing with disability claims on a daily basis, from a Momentum Corporate perspective, around 25% of employers have asked for retirement fund contribution relief. Of those employers who requested relief, just over 60% have put their staff on unpaid leave, 5% have reduced salaries and the balance have asked for the postponement of contributions to alleviate cash flow constraints.

These stats may appear to only have a financial impact, but we must always remember that behind these statistics lie people, employees and leaders who are currently being put through the wringer. In times like these, the public concern mainly centres on the impact this has on the employees, but what about the employers? What kind of the toll is this taking on line-managers and even business owners?

The far-reaching consequences of this pandemic may be hard to quantify at this early stage, but here are some of the more immediate impacts of COVID-19 on employers:

Sick Leave

The Basic Conditions of Employment Act allows employees to take sick leave, and if they don’t have a sick leave balance, then they are entitled to take unpaid leave until recovered. Where an employee exceeds their sick leave entitlement, the balance of the employee’s leave will be unpaid unless agreed to the contrary, which affects their income or ability to earn an income. Therefore employees’ may be reluctant to disclose their COVID-19 risk status which results in a moral dilemma for employees.

Now there is also the added stigma around COVID-19 where many employees are too scared to disclose their risk status as they are afraid of the impact this will have on the entire group of co-workers who will have to self-isolate and may be unable to earn an income if they don’t have a sick leave balance. The moral dilemma for employers is to balance the business’ operational needs, for example client service, with the safety and health of their employees. How do employers deal with this unanticipated risk?

The downside of digital relationships

All relationships have now been digitised as everything happens online. Most researchers would agree that most communication is considered non-verbal so not being able to see the facial expressions makes the building of true relationships and understanding of intent difficult.

Can you really tell if your team is doing well if everyone has switched off their cameras to save data costs? We all know that communication on digital platforms is subject to the tone, so these restrictions and lost in translation moments make it difficult for managers to accurately gauge the health of their teams.

The ebb and flow of productivity

In these strange times, some people become over productive while others struggle with motivation. Even though working from home intended to maintain good output and efficiency during COVID-19, it could generate a worldwide productivity slump and threaten economic growth for many years if not keenly managed by every leader and line manager in every organisation.

Stanford economist Nicholas Bloom has done a great deal of research to show benefits on productivity when working from home. However, he points out that COVID-19 has provided different circumstances and cannot be compared to what working from home used to mean. Now you have to work alongside your children, or for those singles that are isolated, completely alone, and with the added stress of a global crisis.

Leave makes employers restless

Many employees have been putting off taking leave due to travel restrictions and feel it would be a waste of accumulated leave. According to a May 2020 survey by Willis Towers Watson, one third of South African businesses have changed their company leave policies during COVID-19 with a further 25% on the cusp of doing so.

Companies are really worried about the build-up of leave days and the financial implication this will have when they possibly have to pay these in cash due to resignations or retrenchments.

Another challenge is the operational risk of employees all wanting to take leave at the same time once the crisis has eased and the economy starts to recover. This will cause massive disruptions to productivity.

On the other hand, the risk of employees not taking leave and getting burnt out increases the risk of mental health related disability claims. Momentum Corporate reports that on average 9% of all disability claims are as a result of mental health claims and we anticipate that this will increase as the mental health fallout from the pandemic continues.

Who supports the supporter?

Line managers and leaders need to support employees and be aware of the challenges they face such as isolation, distractions at home, concerns about family and friends, anxiety over workload and working remotely, and even the death of a loved one.

COVID-19 is no longer a Facebook post talking about some faraway land with a faraway crisis. It is now affecting our own families and friends. Line managers and business leaders are expected to support their teams with work-life balance all while dealing with the very same issues in their own lives.

Stress on leadership teams

Everybody is facing financial stress, especially business owners and leaders. Loss of business with no turnover from non-essential businesses where they literally could not operate to a necessary degree. With no or low turnover, you can’t pay your employees or your suppliers which, as a smaller business, could mean that you must release your staff without retrenchment packages.

IT has become a soft target

The sudden shift in work environment has put a big strain on IT infrastructure requirements. Companies are seeing a spike in cyber-attacks with a growing need for more secure networks. While the world is focusing on the health and economic threats posed by COVID-19, cyber criminals are finding opportunities to capitalise on this crisis. Line managers must take proactive steps in advising employees to be more vigilant and apply caution as they work from home.

Impact on decision making

Leaders and teams must recognise their susceptibility to decision fatigue as they are facing so many organisational challenges. How do you keep the business afloat? Where do you cut back and where do you expand? What is your ecommerce strategy? This can lead to decision fatigue, having to have a grip on the current situation and the impact your decisions will have in an uncertain future.

Decision fatigue refers to the idea that your willpower or ability to make good choices deteriorates in quality after an extended period of decision making. Under prolonged stress and fatigue, functions such as judgement, strategic thinking and even rationality can deteriorate and cloud complex decisions. As a leader who is forced to make hard decisions with potentially severe consequences throughout the day, you might experience growing difficulty in accurately assessing the risks associated with different causes of actions.

At the end of the day…

It is very clear that the burdens on leaders are significant. An increase in disability from mental health related claims on a management level seems inevitable. As does an increase in non-communicable or lifestyle related diseases such as cancer, hypertension and diabetes as increased levels of stress have been known to exacerbate these afflications not to mention the fact that people are remaining socially distant and avoiding going to the doctor. While the economic crunch in a COVID-19 world is going to affect many employees, let us not forget about the stress that this puts on line-managers and business owners.

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