Employers in a Vice

Recession-stricken employers are finding themselves in a double bind.  Clients, credit, and cashflow have kinked to a mere trickle, while the needs and costs of those people on the staff go steadily on.  In the face of his employees’ fear and potential anger, it is the employer who is left to pace the floor, wondering how to meet payroll, and at the same time, keep his own entrepreneurial spark alive.

To pinpoint the specific challenges confronting today’s Garden State employers and present some possible solutions, Biz4NJ called on John Sarno, President of the Employers Association of New Jersey; Jim Barrood, Executive Director of the Rothman Institute of Entrepreneurial Studies; and Paul Dorf, founder and Managing Director of Compensation Resources, Inc.  Here is their assessment.

Biz4NJ: Gentlemen, from your point of view, could you give us a brief evaluation of where employers and employees now stand?

Sarno: We are facing an extremely dynamic labor situation that is really surging just below the surface.  For the last 18 months, employers have been streamlining their workforce by layoffs, pay cuts, and reduction in hours.  There is simply less cash coming in and less work for the staff to do.  But now we are seeing some pick up.  The company who makes, say, luxury boats has gone from making three a week to none, and now is beginning to make one a week.  The employer must adjust to that, and somehow find the right amount of people in all skill levels to perform the necessary work, without over hiring or being caught short.

Dorf: I think company owners do themselves and their employees a great injustice by concentrating solely on survival, and not considering the work in front of them - and how their employees can handle it.  There is no doubt that the loss of clients and profits have changed our operating methods.  For many companies, the work formerly being done by 20 people is now being done by 15.  We have to realize how this load settles on their shoulders, and work with this new picture.

Barrood: Certainly in the established business sectors, layoffs and drastic cutbacks abound.  But for the entrepreneurs and young startups, this actually makes a very excellent hiring market.  There is a lot of talent now floating around out there that formerly would have been attracted to the larger corporations, with greater abilities to compensate.  Further, the lack of cash flow puts startups on a level playing field with these established companies when it comes to competing for the highest skilled employees.

Biz4NJ:  How would you assess the effect of the New Jersey and the federal stimulus attempt is helping employers?

Sarno: Obviously, the short term bridge and roadwork projects are beneficial - putting large numbers to work rather quickly.  Also, the Governor’s choice to centralize financial decision making within his office has proved a good move.  There simply is no single state agency capable of handling the stimulus monies and all the planning involved.  Of course, the stimulus packages are not entirely strings free.  Banks, for instance, are finding that accepting stimulus funding carries with it real restrictions on H1B visas and the ability to attract top talent from abroad.

Dorf: The stimulus packages are obviously designed to create jobs and do some long needed projects, but I do not see this making a great direct effect on most employers.  It certainly hasn’t affected us.  However, I might add that any company owner, whether receiving grant funds or not, this is the time to be very careful of any personal excess.  Now is not the time to ostensibly purchase the new sports car or give yourself a raise, while you are cutting your employees’ salaries.  You’ve got to make a show of unity.

Biz4NJ: Are there specific regulations that you have seen arising out of the recession and new administration of which employers must be aware?

Sarno: There have come a few of what might be termed slightly protectionist regulations.  These are generally aimed at increasing national employment.  I mentioned the banks limitations.  There have also come some modest “Buy-American” gestures with certain government contracts, but these are deliberately loosely designed, to act more as encouragement, than tight strictures. Thirdly, new whistleblower protections have been passed, and employers need to study these.  But the biggest thing to note is that rather than pushing for overall legislation, the government is using its contract power to enforce certain regulations, such as equal pay for equal work - the Fair Pay Act.  Federal contract regulations have existed before, but as we move out of the recession, and business grows stronger, you will see a much greater enforcement against, e.g. glass ceilings.

Barrood: The major new issues that come to mind are COBRA regulations.  The American Recovery and Reinvestment act of 2009 provides a temporary extension of employer group health coverage (COBRA) which involves, among other items, a 65 percent employer-paid subsidy of the COBRA premium.  The rules and details are confusing, and new businesses should get good consulting advice before establishing any healthcare plan.

Biz4NJ: What groups do you see taking the greatest hits during this recession?

Sarno: Without a doubt it’s going to be the least skilled workers.  Let’s go back to our luxury boat building company.  Two years ago they may have been making three boats at a time, with one man to do the sanding, another who did the fine finish work, and a third to put in the electricity.  Times get tough, the employer is forced into temporary layoffs when no boats are called for, but he asks his crew to stay in touch.  Now, a bit of an upswing begins.  He is making one boat, and he must make do with less.  He calls back the one or perhaps two most highly skilled people.  He can always apply them to the unskilled job.  But the unskilled sander cannot move up to do wiring and other more technical work.  So he gets dropped, and never called back.  This is a permanent business restructuring we are facing, and it is these less skilled, less adaptable people who will definitely be hurt the hardest.  A vast, nationwide skill set retraining will be required.  Up until now the Department of Labor has fallen woefully behind in offering such retraining, thus, the burden will rest on either the employer or the individual himself.

Dorf: I think the burden here will be evenly spread.  Obviously those out of work will have to scrabble and suffer.  But those employees who remain will be working harder, and taking on greater stress and anxiety.  For that reason, employers must never project the attitude of ‘be glad you have a job.’

Biz4NJ: With all these obstacles and challenges, what advice would you give to employers right now?

Sarno: I feel employers need to remain flexible to the ever-changing labor needs and the production readjustments we all are going to encounter.

Dorf: The primary thing is for employers to be cognizant of what their employees are going through.  Be aware that as they are asked to do more with less, they are also waiting for the inevitable axe to fall on them.  They are under much greater stress.  As an employer you want to maximize both morale and performance.  Good employers will search out individual needs and meet them as best as they can.  This may not be in financial compensation, but in other ways.  A little appreciation added to this empathy will go a long way.  Secondly, you want to pull the team together, and make them feel we are all in the same boat.  If you cannot give increases this year, tell them why.  If there are any cutbacks, or diminishing of benefits, explain them in full ahead of time.  In our company, we have turned our weekly meeting lunches into brown bag affairs - for everybody.  The savings are not enormous, but it sends a message that times are tough right now and allows all of the staff to share in this belt tightening.  If people understand the necessity, they will all stick with you, rather than jump ship at the first opportunity.

Barrood: For the entrepreneurs, now is the time to hire, but there are some careful compensation choices that must be made.  Cashflow, which is always tight at the outset, is now tighter than ever.  At the same time you want top talent.  Offering stock as compensation has lost its luster just now.  The era of wishful thinking that this new company will swiftly grow is gone, and therefore stock has become therefore less effective.  At the same time, bringing people on as full salaried employees is risky.  Hiring independent contractors where possible is probably best.  Just make sure you meet the various tax and legal definitions for independent contractors.

Biz4NJ: Finally, what advice do you have for employees?

Dorf: For those who have jobs, the workload will obviously increase.  Stress will increase and you personally must find various ways to manage that.  It’s not only companies and owners who should look at merely surviving.  You as an employee must take on a broader vision, work to initiate new ideas and projects. Also, it pays to seek out some transparency from the management.  Find out what is being cut and why.  You might even suggest some practical trimmings yourself.

Barrood: As employees, particularly with new startups, you’ve got to read the data, and see where the companies are going.  Is this a field worth staying in?  Those looking for jobs are missing a great bet if they do not take advantage of social media.  Check out the various connective sites, company websites, and blogs.  Further, scour the various association websites to find both the situation of a given industry and the jobs available.  Who knows, this may even prove the best time for you to launch your own business and thrive right through the recession.


Paul Dorf has developed an uncanny sense of exactly how to reward individuals at all levels of employment.  A native of New York, Dorf earned his Bachelor’s in business administration and labor relations from Hofstra University in l961.  Upon graduation, he joined the U.S. Marines, going from Private to Captain in barely four years.  “It was here that I really learned what motivated people,” he recalls.  Dorf then studied law at La Salle University in Philadelphia and later gained his MBA in Industrial Relations from the University of Bridgeport and the College of William and Mary, and a Ph.D. in Management Analysis from Cambridge International University and Walden University.  From l965 on, Dorf served several corporations as human resource and compensation expert.  In 1983, he took the entrepreneurial leap and founded the first version of what is now Compensation Resources.  He sold the company in l985, then bought it back in l989 and has served as managing director ever since.  For the past 27 years, he has been on the faculty and taught human resource and compensation courses at various universities, including Boston University, Temple University, and Rider University.  For the last eight years he has taught at Seton Hall.

Jim Barrood grew up in the world of entrepreneurs and small business, with a family involved in both the real estate and auto sales industries.  Barrood took his Bachelor’s in economics from Rutgers University, and his MBA from Texas A & M.  He sits on the board of the Silberman College of Business, The Franklin Foundation for Educational Excellence, and the National Corporation for Corporate Directors-NJ.  He is also a frequent speaker on MSNBC and NJN (Voices of Innovation.)  Since 1997 he has served with Fairleigh Dickinson University’s Rothman Institute for Entrepreneurial Studies, which he currently heads as executive director.


John Sarno speaks the voice of the New Jersey employer with experience as lawyer, educator, and public administrator.  After earning his Bachelor’s in psychology from Ramapo College of New Jersey, he attended Seton Hall University, taking a Master’s in counseling and his law degree.  He began his legal career advocating for equal rights and access for the disabled.  Sarno advises companies on all aspects of employment and labor law, ranging from sexual harassment to wrongful discharge.  Sarno has authored several books helping employers avoid litigation and teaches at several universities concerning ethics and management issues.  As President of the Employers Association of New Jersey, he continues to bring relevant legal and social issues to the attention of the leaders of Garden State businesses.