Firms advised to shun lay-offs, think long-term

Firms advised to shun lay-offs, think long-term

Companies should avoid lay-offs for the sake of short-term profit as they could be stuck with huge pension liabilities for their laid-off workers, while having to rehire more staff to deal with an expected economic rebound in the second half of the year, says human resources consultancy Mercer Thailand.

"We have seen some evidence market demand is coming back sharply, and if companies don't have enough people or capacity to meet the demand, lay-offs would have been a very bad decision," said Juckchai Boonyawat, chief executive of Mercer Thailand.

He said if Thailand does not experience a second wave of the pandemic, demand and other economic variables will continue to improve and give firms leeway to retain employees.

Rehiring and retraining workers can be expensive and could end up costing companies more in the long term if they focus solely on their year-end balance sheets.

"Human capital is still the most important resource for companies, but a lay-off strategy should only be their last choice," said Mr Juckchai.

"We have seen the retail sector especially have to take tough considerations of how to manage their workforce in the coming quarters, especially with low tourism, but we already are seeing people returning to malls and demand surging in the sector."

The unemployment rate in Thailand is expected to hit 4-5% this year from its average of about 1% over the past few years, according to the Ministry of Commerce, impacted heavily by the sharp decline in the tourism and hospitality sectors.

"We do not expect to see double-digit unemployment like in some Western countries," Mr Juckchai said. "Thailand is still a very labour intensive country and companies can see benefits from holding on to their workers to meet future demand increases."

Pension liabilities are another factor that make lay-offs a less ideal option in the third quarter and fourth quarter, said Kasin Sutuntivorakoon, wealth business leader of Mercer Thailand.

Pension funds across the world have taken major hits due to falling stock prices and dropping valuations of other assets.

Companies that lay off half their workers could be left with huge financial liabilities to pay their pensions, as they rehire more workers to meet the demand from an expected economic recovery in the second half of the year.

"We believe lay-offs could be a double jeopardy for companies," Mr Kasin said. "If they go through with lay-offs for short-term profitability, it could be the wrong call."

He said companies should make their workforce more flexible through reskilling and other means to deal with these types of temporary crises to avoid the long-term expenses of letting go then rehiring large numbers of workers.

It would be in firms' best financial interests, not to mention the incalculable benefits to the workers themselves, amid the worst financial crisis in a generation.


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