The Complexities of a Layoff
When we hear the word “layoff,” we often respond in an emotional way. We’re immediately concerned about the employees who were let go—employees who are sometimes our friends. And compassionate questions race through our minds. Is there a severance package; If so, how generous is it? Will their family be financially secure? When will they find another job?
We also consider the company making the layoff—sometimes our own employer. And while there may be a degree of compassion for the company, it’s usually overshadowed by mixed feelings, from frustration to skepticism to concern. Is the company ok financially? Do they really need to cut costs by letting go of people? Will they lay off more?
Layoffs trigger a palpable sense of angst, every time, even for those with the difficult job of making them.
While some degree of angst is predictable—let’s call it the expected, simple response—layoffs are often unexpected and anything but simple. There are many factors to consider, steps to take, and people to engage. Let’s take a look at some of the most inevitable complexities that companies face when letting go of employees, broken down by department (plus outplacement services).
Complexities for HR abound, perhaps more than any other department during a layoff. While there are dozens of items to consider here, we’ll focus on two: communication and retention.
Communication – It must be consistent, unwavering from leadership’s agreed upon messaging. If that message is one of specific reason, gratitude, and sympathy, then it should be expressed in the same manner, from the top down, throughout the process. Inconsistent messaging can cause anger and distrust among employees, the last thing any company needs during such a trying time.
Retention – Keep in mind that it’s generally much more expensive to find a new employee than it is to keep an employee. During a layoff, remaining employees can be offered chances to speak with leadership, their bosses, and even outside counselors. It’s also increasingly common to offer them opportunities for skills development and a rebalance of their workloads. HR should devote as much time to their current workforce as they have to their laid-off workforce, re-instilling a strong sense of confidence and camaraderie.
Companies must comply with numerous laws related to layoffs. One federal act often dominates conversations: The Worker Adjustment and Retraining Notification (WARN) Act, which was established in 1988. As the Derek Smith Law Group, PLLC, states, “Under federal law, the WARN Act requires employers with 100 or more employees to provide at least 60 days’ notice to employees of mass layoffs.” There are several other components of this act and also state-specific WARN Acts which can differ. In addition to the WARN Act, there are an array of laws pertaining to disabilities, protected classes, retaliation, and more which must be complied with during a layoff.
A common question fielded by in-house and outside counsel has to do with severance pay: Is severance pay mandatory? Per the Fair Labor Standards Act, it’s actually not, although it may be mandatory in certain states under specific sets of circumstances. Today, the majority of American businesses offer some form of severance mostly out of goodwill and also to help protect their reputation in the marketplace.
Sometimes, for any company of significant stature in its community or industry, local and potentially national media will come calling. Again, while there are many considerations, we want to focus on two: the announcement and the reason.
The Announcement – It’s debatable whether a company should even announce a layoff to the media. On one hand, why give them the option to shine a negative spotlight? On the other hand, why not be open and honest with all parties, including the media? This often comes down to history, reputation, and other factors such as the reason for the layoff. In general though, if there’s a clear and justified reason, along with an objective degree of sympathy for those who were laid off, media relations shouldn’t be an issue.
The Reason – As we just mentioned, the reason for a layoff should be clear and justified, as they usually are. If it’s a cost-cutting response to a recession, say that. If it’s because of an acquisition and shift in direction, explain that. Be thorough and transparent to the media. If a reason is ambiguous, it could be an open door for a painful interrogation or even a tarnished reputation.
In our last article, “The Uncomfortable Inevitability of Layoffs,” we mentioned that over 40% of American and Canadian companies offer outplacement services, a number that’s risen steadily since 2018. But outplacement services come in different degrees, so what exactly are companies offering? In short, career guidance. That can mean actual career coaches. It can also mean interview training, resume writing lessons, and even development and learning to facilitate career changes. Regardless of the level of outplacement services offered, it’s an increasingly common way—almost an expected way—of taking care of former employees and managing a reputation to attract future employees.
While we only scratched the surface of the complexities here, we did cover some of the more pressing ones. If or when your company experiences a layoff, go in knowing the complexities. Embrace them. Because the most dangerous thing is to overlook them and not tend to them.
In part three of this blog series, we’ll take a look at the psychological roller coaster of a layoff and how to manage it.