Lay Offs During MCO: Why Businesses Are Forced To Do It

With the extension of the Movement Control Order (MCO) spanning out to weeks, layoffs are triggered and some people are venting their frustration on social media that their employers are cold-hearted.

I get it, getting laid off sucks. I’ve been laid off twice in 2014. I know what it feels.

I also had a small business that employs people (luckily my staff quit instead of me having to fire them).

From my observation, the cause of employee anger boils down to 2 things:

  • People thinking that the world will resume as normal right after MCO
  • How they were treated during the layoff process

From my observations, some people think that the MCO & the Covid-19 pandemic will end precisely on the 14th of April and the world to resume like normal right after.

We all have to be realistic about this global pandemic and its effect on our health and economy. Modern history has never experienced anything of this magnitude where the whole world grinds to a halt.

This article will help people to understand what business owners are going through in this challenging environment and why they are laying people off.

MCO = Most Businesses Have No Sales

Here’s the definition of ‘business‘ from Investopedia:

The term business refers to the organized efforts and activities of individuals to produce and sell goods and services for profit.

Without profit, it’s not a business. As simple as that.

The MCO forces everyone to stay at home to break the chain of Covid-19 (which is the correct move). But when people don’t move and spend money, our economy simply stalls.

At first, the government announced the MCO for only two weeks, which shocked the ordinary lives of Malaysians & its economy. Still, most businesses can absorb this financial blow.

But when the MCO had to be extended for another 2 weeks (1 whole month of MCO), that’s when businesses start to crumble. No sales, but they still have to pay their overheads (rent & staff salaries).

Sample of Company Cash Flow During MCO

Take this example of monthly cash flow for a small restaurant:

Normal BusinessDuring MCO
Sales40,0002,000 (maybe 0)
Rent & Bills-5,000-5,000
Staff Salaries-10,000-10,000
Profit25,000-13,000

During the 4 week MCO, this business is at a negative cash flow.

Let’s say this business predict that they’ll be affected for 3 months, so 3 months of negative cash flow:

-RM 13,000 x 3 months = – RM 39,000.

That’s crazy and simply unsustainable. This is when a business owner has to make a tough decision.

If the MCO is lifted on the 14th of April and the world resumes like normal, then I think any healthy business should have enough of a financial reserve to cushion a 1-month impact.

But let’s be honest here, shall we? Businesses are expecting this pandemic to severely affect them for months to come. That is simply unsustainable.

How Long Will the MCO Last?

The reality is that nobody knows how long will the MCO last to break the chain of Covid-19.

Will the virus die off by April 14th, like what the government is saying? Or will we have to continue the MCO for a couple more weeks or even months?

Nobody knows, not the scientists, not the Malaysian government, not Donald Trump, not even China.

Hint From Government Bodies

Bank Negara Malaysia | Central Bank of Malaysia
Source: BNM

The government already hinted to us how long they think this MCO will affect us financially when they announced the automatic 6-month moratorium to all loan borrowers.

Why six months? Why not 2, or 3? Those people in BNM know how the economy works, and this is their calculated estimate.

I’d imagine they wouldn’t allow such a 6-month payment holiday willy nilly.

The point that I’m trying to make is that there is a big probability that the MCO will be extended beyond four weeks total. But for how long?

Nobody knows. Most businesses are preparing for the worst, hence the layoffs.

After layoffs, the next stage of business survival is for companies to liquidize any assets for emergency cash. The final nail in the coffin will be to close shop.

Good and Bad Way of Laying Someone Off

If you put your feet in the manager’s shoes, you’d not want to fire anyone either. It’s like breaking up with someone. It just sucks no matter how you approach it.

Brutal Layoff Method

Getting laid off without warning or explanation, through an email, without a proper meeting or face-face sit down are the worst.

It happens and you may call your employer a coward for doing such a thing.

But let’s be honest, there’s no perfect way to lay someone off. Emotions will erupt no matter what you do.

Some managers can’t handle it themselves and hence the cold-hearted approach, because it’s the easiest for them.

Better Layoff Method

In 2014, my manager called me into his office this one time and explained to me about the deteriorating economy and how they don’t see the company making any profits for the next couple of years due to external factors beyond their control.

He explained to me why the management decides to cut down costs and my position was made redundant.

I felt horrible, but he explained everything calmly with a logical perspective that prevented me from taking it too personally.

He even went out of his way to recommend what job I should try instead and offers to make me a recommendation letter if I needed one.

Now that was a solid dude.

What You Can Do

It is time to stop the blame game. Everyone is in survival mode. We all are in this shitstorm together.

If you are a manager or business owner and need to lay off your employees, you’d now have some ideas on how to do it humanely.

If you still have your job, make sure you’re not slacking off and show that you bring massive value to your organization.

If you’re a homeowner, use the moratorium to build your emergency funds.

Save up and brace for financial impact for the upcoming economical uncertainties.

Not all are privileged to have emergency savings or be quarantined & able to work from home in a nice house with separate rooms for everyone.

Check up on your other family members, neighbors and the less unfortunate. Do they have enough food and basic necessities to ride this out?

Helmi Hasan

Hi, I'm Helmi Hasan, the founder, and writer for the personal finance blog, Balkoni Hijau. Read more in the 'About Me' page or follow me on Twitter.

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