Sometimes the best examples come from your friends rather than from research.

My friend works for a major government contractor in the US, and the contract was up for renewal last month. Unfortunately, the government office for which they are working dropped the ball on their administrative requirements, and they did not run all the paperwork in time, so the contract expired on March 30th. It will get taken care of, and the contract will restart, but it could take a week, or it could take a couple months. The company does not know, the government does not know, and the employees do not know.

So, at the end of March, the company told employees on this team not to come to work starting in April, and that they had two options: they could take vacation days, or they could take unpaid leave. They would not, however, get moved to other projects within the company, so there was no paid work for them to do. They also would not get laid off — which would allow them to collect unemployment insurance — and then rehired once the contract was approved by the government.

Naturally, some of the team members started looking for new jobs: temp work, internships, and new full-time jobs. It was a stressful time, as people of course have bills to pay, and there is all kinds of uncertainty about when things will restart. Things were looking pretty bad, and the company was creating a retention challenge for itself.

Then, on April 2nd, my friend got a call. Nobody knows yet how long it will take to get the contract through the approval process, but the contractor has decided to pay the team members out of its overhead accounts. So now, they do not go to work, and they get paid anyway…a pretty good deal, and about a 180-degree change from what was happening only 48 hours earlier.

What happened? Well, the company realized they were going to lose these employees, because of course they could not just sit around waiting without an income. In the event that happened, then even when the contract renewal was complete they would not have any employees trained and ready to carry it out, which could cause serious problems for the contractor. Of course, some employees might still return, but their morale would likely be pretty low and they would probably jump to another job as soon as they found one, given that this company did not seem too concerned about their welfare.

In a situation like this, where you have a temporary reduction in your workload, you need to make a decision about what to do with your employees. It is a tough call. Obviously, if your revenues drop, it is hard to keep paying employees the same amount, because after a long enough time, you simply run out of money. However, if you can absorb a short-term loss, you might avoid a long-term loss when the opportunity for more work returns but without a workforce capable of doing it. Your decision will turn on whether this is truly a temporary situation, or a permanent change in your market. If it is temporary, and you can find a way to keep your employees on the payroll, you need to do what you can to make that happen. It is not just a nice thing to do — though loyalty is important, never forget that — it is also good for your business. Retention during a downturn helps sustain you for the future.

Oh, and my friend? Well, he was looking for a temp job to pick up a little extra money, since he is heading off to grad school in the fall. So yeah, the timing on all this was pretty bad for him — looking for a new job when you will only be around until August isn’t cool — but now it is turning out OK. Fortunately, he had a lot of good karma saved up.