Best Practices in Employee Layoffs
As you know, I post reader questions and my response when I believe they may have broad applicability to site visitors. Please take the time to respond to this reader in “comments” below.
Reader Question:
Are there any standards for a company facing a work slowdown? Last hired/first to go? Also any protocol relative to the timing such as Friday versus any other day of the week? End of pay period? Two weeks' severance? What do you recommend?
My Response:
I'd start by talking with an attorney or a consultant who specializes in layoffs.
The answer depends on the practices your company has used before and on a variety of legal and ethical guidelines. The one time I had to do layoffs, I eliminated a complete department and then the managers decided whom they could most easily afford to lose based on the employee's job description. I had to be careful that I was not discriminating against any protected classification and that we applied the criteria for layoff selection equally across all departments.
Some companies do use last hired / first to go. I don't recommend it. You are cutting out all of your experienced recent hires or your young, diverse talent. I prefer you make a business case for each layoff. Other companies eliminate shifts. Other companies have all employees take an unpaid day every two weeks. Be creative; layoffs may not be your only answer.
Some companies eliminate a position, such as all clerical employees, and shift the work to the managers and staff. I have even heard of companies that tell each department they must downsize by 10%. Although superficially "fair," this is bad for the business because you may be eliminating essential positions.
You should do layoffs as close to the beginning of a week as possible so people can immediately apply for unemployment and start their job search. The last thing you want is to create a situation in which people are mourning, fretting and becoming angry over a weekend when action possibilities are limited.
I think you need to do layoffs as soon as the business need makes them necessary. When you do the layoffs, you need to have a severance package ready and a legal document releasing the employer from liability. I believe that laws regarding these may differ from state to state and recommend that you check with your state department of labor. (The employee generally has a certain number of days to respond and a certain number of days during which he or she can change their mind about the signing.)
Depending on your business, and the number of layoffs you are contemplating, the WARN Act provides legal guidance about when employees must be notified of an upcoming layoff.
My recommendation for severance pay is that you devise a formula that provides one to two weeks of pay for each year that the employee has worked for you. You can also consider providing employment assistance services. The more generous your severance package, the more likely the employee is to accept it and sign the release from liability.
Treat people with dignity. Do the layoffs individually with Human Resources and the employee’s manager present. Complete the process on the same day. Do not even consider a mass meeting, telephone conference call, or an email to lay people off. They deserve more than that from you. Additionally, giving your employees information about the business problems and some sense of layoffs coming up as soon as you think they may be necessary will increase the trust of the remaining employees.
More About Employee Layoffs
- Downsizing With Dignity.
- Survivors Can Soar After Downsizing.
- Downsizing Survivors.
- I Just Lost My Job: How Am I Going To Tell My Kids?
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Comments
As far as standards go, I left corporate 8 years ago because I didn’t care for the ridicuous politics and went onto for full time consulting. But I will tell you this, the shift in dynamics in the current corporate structure is going to change, severe changes will have to change. We will have to adhere to the viable working public, the baby boomer age bracket population, and our current economic situation. Please know we have only scratched the surface of how things are going to change.
My feeling based on my 20 years experience in corporate management (HR for 12 of those years, treat people with dignity, respect and forthrightness. I would also gauge the “quality” of committment level the employee’s involved. For example; a 15 year employee may be a fair, gets their job done on time not adding additional but the job requirements but has a stronge committment level and has always made themselves availble for the company; know that loyalty and dedication are of extreme value for most emplyers. Quality not quantity will always win out in 90% of most ptofessions. We all know that quick turn-arounds wind up staining, not only the corporate structure around them but eventually good quality employees you want to recruit may not even want to entertain the possibility of your company. HR needs to be the forefront of marketing to keep good staff committed.
In downsizing, it is always an uncomfertable spot. Being able to do it now within our econmic crisis, you need to understand that not is it just their livlihood, but their life. The emotional state of people will be further challanged and in treating folks with dignity and respect will help lessen the emotionally charged employees. I see there is going to see a lot of this before our economy picks back up (at least 5-7 years).
Giving notice on Friday’s doesn’t necessarily make it easier for folks to deal with, it could actually be worse. I think Wed might be the lessers of evil. It will give them the chance to either drown their sorrows for a few days, giving them time off to refresh themselver and going back into the job market on Monday. Other folks who are extremely very proactive will maybe give themselves a day for the shock and then jump in the saddle again.
Laying off your staff would be advantageous for everyone involved if you end it at the end of a pay period, it makes the most sense especially of your doing mass layoffs. If severence is involved it is even more worthy to do it at the end of pay period and less repercussions of disgruntled employees.
Are you aware of any fortune size companies that has reduced the hours of employees as an alternative solution to layoffs? How did they apply this method to their exempt and non-exempt populations? What types of positions were impacted? Can you name some of these companies? What are the positives and negatives of this approach?
Thanks
If a company has long-term non-exempt employees that have demonstrated specific skill sets useful to another department, is the company justified in laying off those employees while retaining short-term contract employees to perform those functions?
Case in point: An engineering company has a backlog and is in fact paying overtime to contracted AutoCAD workers to meet schedules. A long-term, non-exempt, direct employee with the requisite AutoCAD skills and demonstrated abilities, who has been working in another area of the company, and, is willing to perform the work, has been laid off with the promise of recall.
Should the company have let a contract worker go and re-assigned the long-term direct?