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Making tough decisions

Determine if you really want to continue your business

On this page

  • Exiting your business
  • Managing staff after a crisis
  • Further support and resources

After any crisis event, you should take the time to do a reality check to determine whether you really want to restart or continue your business.

It can be useful to think through the following questions:

  • What are my bookings and turnover likely to be in the coming months?
  • What will the impact be on my staffing levels in the next six to 12 months?
  • What new products or experiences will I need to create or identify in the local area to offer to visitors?
  • Was I happy running my business before the disaster?
  • Am I prepared for the potential extra demands that recovering my business will place on me, both personally and financially?

While many business owners may not be ready for such a reality check, it should be undertaken at some point. You might need the help of a trusted adviser, such as your accountant to help you make these decisions.

Exiting your business

If your business has been significantly affected by a crisis event, you should consider the viability of your business. While many businesses reopen and operate successfully after a natural disaster, some do not.

Estimates from the United States indicate that up to 40 percent of businesses never reopen following a disaster and of the remaining businesses, 25 percent will close within two years.

Going through the options open to you, it's important to seek guidance and advice from your business advisor, accountant or lawyer.

If you do decide to exit your business there are several other online sources available to you:

Time to exit

There are several ways in which the business owner can exit from their business, including:

  • selling the business
  • passing the business on to a family member, partner, employee or other stakeholder
  • merging the business with another business
  • closing down the business – sale of assets and cease trading
  • liquidating – liquidate the business and sell off the assets
  • forced closure – file for bankruptcy or liquidation.

Take the time to assess each option carefully. Before you make a final decision, speak to your business adviser, lawyer or mentor and obtain specific financial and legal advice.

Consequences of continuing a business while insolvent

It's important to understand the risks if you continue a business while it is insolvent. For information on the consequences of insolvent trading, speak with your accountant or lawyer, or visit the Australian Securities and Investments Commission website.

Managing staff after a crisis

After a crisis event, you may be faced with the tough decision of whether you can continue to employ your staff in the short, medium and long-term.

During the recovery phase, here are some tips on how to manage your staff:

  • Make a thorough appraisal of the short, medium and long-term situation before making decisions about the future of your staff
  • Stay calm to avoid your staff becoming anxious
  • Listen carefully to staff advice and concerns
  • Keep everyone informed
  • Maintain normal procedures as much as possible
  • Take charge and show leadership of each emerging situation.

Three key areas to consider are:

  1. Reviewing your staff structure
  2. Managing a staff restructure
  3. Making your staff redundant.

1. Reviewing your staff structure

If the success of your business is closely tied to the skills or reputation of yourself or your managers, then this may give you some flexibility when deciding whether to retain staff in the event of an emergency.

Questions to ask include:

  • Should the existing mix of skills in your business be retained or broadened?
  • Can any critical skills be outsourced to contractors, rather than retaining permanent staff?
  • Will training be required if we ask remaining staff to take on broader responsibilities? Would this be external or on-job training?
  • Should retained staff be:
    • purely assistants?
    • ideas people?
    • customer focused?
    • money earners for the business?

2. Managing a staff restructure

Before taking the serious action of retrenching staff, look at all the options that may enable the business to retain staff, beyond a short or medium term crisis.

Option 1: Invite employees to take accrued leave

Accrued leave entitlements would need to be paid even if the staff member is retrenched, so business cash flow would be unchanged. However, you would need to be confident that the emergency impact would only be short-term, and that the person's job would be secure in the longer term. Otherwise, the employee would be deprived of any income while seeking new employment.

Option 2: Negotiate leave without pay or part-time

Negotiate for staff members to take leave without pay, or full-time workers to work part-time. Again, you would need to be confident that the emergency impact would only be short-term, and you could restore the normal working arrangements for the person soon after.

Option 3: Consider contracting arrangements

Consider the merits of changing staff employment arrangements to contracting arrangements so that your staff have the potential to earn other income. This would reduce the ongoing commitment of the business to regular wages. However, there must be genuine prospects and intent for contracted staff to attain other work; a simple arrangement whereby a business avoids its responsibilities as an employer by engaging dedicated contractors may not be legal.

Option 4: Find staff other temporary employment

Negotiate with other local businesses to employ your staff on a temporary basis. Although, note that this option can have legal and practical complications if the location of the work is less accessible to the staff member, or if the job requirements are substantially different from those at your business.

3. Making your staff redundant

If you've concluded there's no way to retain all of your staff as a result of a crisis, and the impact of the crisis is likely to have a long-term threat on the viability of your business, the following are some points to consider in relation to redundancies.

  • Check the Industrial Award, the Employment Agreement, or the business's own Terms and Conditions of Employment, to be sure of your legal obligations in negotiating with staff or making any changes to their employment arrangements.
  • Seek advice from an employer organisation such as the Victorian Chamber of Commerce and Industry 

Importantly, note what may be required in terms of:

  • any specific redundancy payments
  • the potential for claims of unfair dismissal   there have been many cases where it has been assessed that an employer has sought to disguise wrongful termination as redundancy
  • accrued leave and entitlements
  • ability to make it clear that retrenchment is necessary due to a downturn in business, rather than the unsatisfactory performance of the employee
  • the way in which the retrenchment is communicated to the employee
  • provision of adequate notice and support to the outgoing employee, such as references.

Discuss any changes with affected employees before putting changes in place.

If you decide to go ahead with a restructure, make the process as easy as possible on staff by explaining why the restructure is happening, allowing time for one-on-one feedback, and providing a process that supports staff in retaining their dignity and self-esteem.

Make sure the restructure does not leave your remaining staff disillusioned or uncertain about their own future. Keep staff informed about why you've made the decisions you have.

Further support and resources

Under the Fair Work Act 2009, businesses affected by a natural disaster may be able to change their employment arrangements, including standing down staff. 

The Fair Work Ombudsman has published a factsheet on employment entitlements during disasters or emergencies.

For further information, visit the Fair Work Ombudsman website, or contact the Fair Work Infoline on 13 13 94.