Despite previous cost cutting, UM to lay off employees in June, begin furloughs soon

After a series of belt-tightening measures weren’t enough to flatten the curve of financial stress brought on by the coronavirus pandemic — and in anticipation of a possible second wave of infection — the University of Miami will lay off employees in June and soon begin furloughs.

The news came in a letter penned by university President Julio Frenk that was posted online Friday afternoon.

Since campuses officially shuttered March 12, “it has become clear that a reduction in workforce has regrettably become unavoidable,” Frenk wrote.

In a phone interview, Frenk said the university — and society at large — needs to brace for the “distinct possibility” of a second wave of the pandemic as the economy reopens.

“If we have some of those worst-case scenarios, you cannot do this kind of careful analysis of opportunities for furloughs when you already have an emergency upon you,” he said. “You have to be one step ahead of the crisis.”

Frenk called it contingency planning — like planning for a hurricane that lasts much longer.

“The reason we’re acting like that is to avoid having the university in a critical situation,” he said. “The university was in a very strong financial position before the pandemic, and we’re coming to this from a position of strength.”

In April, the private Coral Gables university implemented a hiring freeze, a postponement of merit-based pay raises, cut down on non-essential and non-salary expenses, delayed planned construction projects until 2022, tapped into unrestricted donor funds and expanded its incoming freshman class by 150 students.

Just a few weeks later, the university announced pay reductions for top officials, the suspension of merit-based salary raises and of UM contributions to employee retirement plans.

Frenk told the Herald that a 15% pay cut for all senior executive leaders, including himself, plus a 10% pay cut for the top 1% of earners, saved the university $6 million. He said that could be revised in September or could be extended.

He said the university saved $40 million across its entire system when it suspended contributions to employees’ pension plans until May 2021.

Frenk explained in his letter Friday that those measures were not enough, and the university needed to take more drastic steps.

He rattled off why: The Coral Gables and Marine campuses are incurring refunds and unanticipated expenses as the university works to repopulate campuses on time for the fall semester. Revenue losses from canceled elective medical procedures hit UHealth hard. And the university needs to brace for a possible second wave of the pandemic.

“In sum, the breadth of the economic slowdown and the pace of recovery we expect in light of necessary restrictions makes our current rate of expenditure unsustainable,” Frenk wrote. “We must address existing shortfalls and ensure that the whole of the university will be financially sound and prepared to address short- and mid-term contingencies.”

He said that managers are carefully looking to find opportunities to cut or combine units and find permanent efficiencies, eliminating functions that are “nice to have but not essential to have.”

“It’s a very careful, case by case analysis of each unit, looking for opportunities,” he said.

There’s opportunity during the summer months, Frenk said. The university used to host conferences and keep students on campus, or have programs for visiting high school students, all of which have been canceled.

“The staff that would’ve normally worked for that, they don’t have work to perform and we can’t afford to pay them when there’s no work,” he said. “That’s an example of people who would be furloughed for months of the summer with the condition that they would come back.”

Frenk wrote that layoffs will be necessary for employees who carry out activities “we do not foresee resuming fully” or that are deemed inefficient. Official notice will be given to those employees next month. Frenk has said and reiterated in his letter that the university will “avoid indiscriminate across-the-board reductions.”

Furloughs, defined by the university as unpaid leaves for those expected to return, will begin “soon” for employees who are unable to perform their duties remotely or who have significantly reduced workloads as a result of the pandemic. Frenk wrote that furloughs are a temporary measure, and affected employees have already been notified.

Frenk told the Herald that the furloughs could last a “couple of months” up to six months. Some employees may have partial furloughs, meaning they could work a few days a week.

The university will continue to offer furloughed employees benefits and cover the cost of medical and dental premiums prorated through their furloughed leave, he wrote.

“We are looking at the needs. We’re doing this in a very thoughtful way,” Frenk said. “Everyone who gets furloughed continues to get health benefits, so no one is left without insurance.”

Frenk wrote that employees affected by furloughs and layoffs will be eligible for state unemployment benefits, and human resources will provide support, including outplacement services.

“This is a message I had hoped I would not have to deliver,” he wrote. “As difficult as these decisions are and as much as we value all of our employees, our commitment to protecting the institution of which we are all a part — one that has been and must continue to be a beacon of hope and creativity — is more necessary now than ever.”

This story was originally published May 22, 2020 at 4:46 PM.