Seven Cost-Saving Measures to Help Hoteliers Avoid Layoffs

COVID-19 Housekeeping

During the COVID-19 pandemic, hoteliers across the country are implementing cost-cutting measures to avoid wholesale reductions in force (RIFs), opting instead for temporary saving measures, reversible when the economy recovers. The following suggestions may offer hoteliers options to save funds related to exempt employees.

1Mandatory Furloughs

Hoteliers may require exempt employees to take a full work week off without pay (known as a “furlough”) because exempt employees need not be paid for any week in which they did not perform work. Furloughs, which are short-term and temporary in nature, can avoid the consequences associated with terminations (i.e., payout of unused paid time off). During a furlough, exempt employees may not perform any work (e.g., no e-mails or calls). Furloughing the same employee on an intermittent, staggered, or non-consecutive basis, though, could jeopardize employees’ exempt status. When using a furlough, myriad complications must be considered such as benefits, healthcare continuation, the Affordable Care Act (ACA), paid time off (PTO), and retirement benefits. Hoteliers should have a plan in place prior to the furlough to address each of these issues in a uniform and consistent manner.

2Reduced Pay (With or Without a Reduction in Job Duties)

For all “at-will” employees, pay rates may be changed on a prospective basis, even if the exempt employee’s workload and schedule remain unchanged, as long as the guaranteed salary remains over $684 a week (California and New York have higher minimum salary requirements, so state law must always be taken into consideration). The reduction should not be intermittent and should extend beyond a single week or two to avoid looking more like docking pay and less like a reduced-schedule arrangement. State law may also require prior notice before making this change.

3Unpaid Personal Days for Volunteers

Employers may reduce weekly pay if the exempt employee takes (i) entire days off in a way that is (ii) completely voluntary. This option is only available to full-day absences caused by the employee—not the employer.

4Full-Day Deductions for Bona Fide Sick Leave

Deductions from an exempt employee’s salary may also be made for absences of one or more full days due to sickness or disability (including work-related accidents), if the deductions are made “in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability,” including for absences after the employee exhausts plan-covered absences. Thus, if the hotelier’s plan provides compensation for such absences, it can make deductions for absences of one or more full days because of sickness or disability.

5Requiring PTO Use During Shortened Work Periods

Hoteliers may require employees use accrued PTO if the employee works shortened days or weeks, provided they still receive the same full weekly salary. No true deduction from pay occurs here, only a reduction in the exempt employee’s PTO bank.

6Voluntary Separations

Hoteliers may offer consideration for employees to voluntarily end their employment. Though this options requires some monetary consideration, developing a voluntary separation program offers many advantages. Because the program is voluntary, this approach helps protect employee morale and allows employees considering retirement or separation an opportunity to move forward with their plans more quickly.

7Tax Deductions for Eligible Wages

The recent Families First Coronavirus Response Act (FFCRA) applies to hoteliers with fewer than 500 employees. In certain situations, hoteliers face obligations to provide up to two weeks of paid sick leave for leave caused by an employee’s inability to work relating to COVID-19. Still, where FFCRA requires paid leave, hoteliers are entitled to claim a tax deduction equal to the wages paid, subject to the statutory caps.

In addition, in specified situations, the CARES Act allows eligible employers of any size to claim a payroll tax credit for 50 percent of wage paid to employees, up to $10,000 per employee, for a tax credit of up to $5,000. The CARES Act predicates this credit, known as the employee retention credit, on employers having business operations fully or partially suspended based on governmental orders relating to the coronavirus, or having gross receipts that are 50 percent less than the same quarter one year prior.

Before invoking either tax credit, hoteliers should consult with counsel or experts on the respective issues.


As this article demonstrates, hoteliers have a number of options to save costs to address the challenges COVID-19 continues to present. Hoteliers should carefully review and understand applicable federal, state, and local obligations in implementing any of these strategies, as well as considering the impact on employee morale before implementation.


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Sarah Kuehnel, a shareholder in Ogletree Deakins’ Tampa and St. Louis offices and a Super Lawyers’ Rising Star, has devoted her entire career to providing litigation and counseling services to management and employers. She successfully defends employers in trial and appellate courts, while also providing advice, counseling, and training to mitigate the risks of litigation. Melissa Pesce, senior counsel in Ogletree Deakins’ St. Louis office, focuses her practice on employment litigation and counseling for employers on a wide range of topics including federal and state anti-discrimination laws as well as creation of employer-specific policies, contracts, and training materials to assist clients with successfully managing a workforce.