The short-term outlook is grim for many real estate agents after Redfin (NASDAQ: RDFN) Chief Executive Officer Glenn Kelman announced they would be making some major short-term and long-term cuts to employees starting on April 5, 2020.
The company stated they will furlough 41% of their agents until September 1, providing a transition bonus and health care benefits through the summer. This cut is a result of the coronavirus epidemic and slowing real estate market and equates to a total 7% reduction in staff.
The company hopes that the large-scale furlough will provide their agents and employees with the opportunity to earn more on unemployment than they could as agents because of programs like the CARES Act and the federal government's $600 weekly contribution to each person's unemployment insurance. However, their furlough plan doesn't take into account whether the employee would qualify for unemployment benefits or the employees who reside in the 25% of states not currently offering programs such as the CARES Act.
In addition, Redfin announced temporary salary cuts ranging from 10% to 15% for select staff, and Kelman stated he will not take a salary for the rest of 2020. These cuts will result in an estimated $2.9 million to $3.3 million relating to severance costs, which will be incurred in the second quarter of 2020.
Kelman clearly hopes that this temporary but drastic measure will help the company withstand the pandemic, saying, "To those who have been asked to leave Redfin today, thank you. I can't imagine the grief we've caused you. I'm sorry we let you down. We'll fight like wild animals to bring everyone on furlough back."
Redfin is not the only real estate company taking measures to reduce staff in these challenging times. With no end in sight for COVID-19, it's likely more real estate companies will follow suit in the coming months as they prepare for slowing real estate sales.