5 Stages of Layoff

5 Stages of Layoff


In today's business world, employee layoffs are typical and can be difficult for both employees and companies. People can better plan for the future and adjust to the changes by understanding the stages of layoffs. I will go over the five stages of layoffs in this essay.


5 Stages of layoff: What are layoffs?

The Cambridge dictionary answers layoffs by stating that a layoff is when an employer stops employing someone, sometimes temporarily, because the company does not have enough money or work. According to Cascio and Boudreau (2011), a layoff is the temporary or permanent termination of employment initiated by the employer, usually for economic reasons and often accompanied by severance pay. Other prevailing reasons for layoffs include restructuring, mergers and buyouts.


To understand what layoffs are, a recent example would be the significant layoffs that tech giant Meta made in 2022. The layoffs affected almost 11,000 workers, estimated to be around 13% of Meta's workforce.



Related: Employee layoffs and its impact on employees


Stage 1: Identification of the need for layoffs

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Layoffs are a challenging but occasionally essential decision for businesses. Identifying the necessity for layoffs is the first step in the process. This involves analyzing the situation and may entail some steps, such as:

  1. Reasons for layoffs: For various reasons, such as economic downturns, restructuring, or changes in corporate strategy, businesses may be forced to lay off people. It is crucial that businesses clearly define the causes of layoffs and properly inform staff members of them.
  2. Deciding on the scale and scope of layoffs: After determining the need for layoffs, businesses must decide on the size and breadth of the layoffs. This may entail determining which departments or positions will be impacted, how many people will be let go, and the standards by which layoff candidates will be chosen.
  3. Announcement: At this point, the company notifies staff of layoffs. Challenger, Gray & Christmas, Inc.'s survey indicates that in 2020, 80% of businesses announced their layoffs publicly. The same study found that 62% of businesses announced their layoffs by email or video conference call.

 
Stage 2: Preparation and Planning

Preparation is the next stage in unpacking what layoffs are. Employees start to get ready for the prospect of getting laid off. In a 2020 Glassdoor study, 38% of laid-off workers reported receiving no advance notice of their termination. According to the same survey, 44% of laid-off workers stated they received one week's notice or less.


A company should always avoid multiple rounds of layoffs. This can attract negative press for your company and cause fear among your remaining employees that they, too, could be let go. It is important to plan the layoff process carefully. Research has shown that a well-planned layoff process can lead to better outcomes for employers and employees.


Related: Big Layoffs From Big Tech: What Does it Mean for HR and Talent Acquisition?


Stage 3: Execution

The actual layoffs take place during the execution phase. Both employers and employees may find this to be a challenging period. In 2020, the COVID-19 virus caused over 2.3 million layoffs in the United States, according to data from Statista.

 
It is critical to have open lines of communication with your staff. Research has shown that workers who believe they were treated decently after a layoff are more likely to feel positive about their employer in the future. This entails giving specific justifications for the layoff, being open about the business's financial state, and providing assistance services like career counselling or severance compensation.


According to research, this stage may involve a sit–down between employer and employee. Sitting down with a worker about to lose their job will be challenging, but if done professionally, it might lessen the worker's possible bitterness. Employers must ensure they are ready for the meeting and that the employee has access to any pertinent information.


Related: How to Resign from your Job: Everything you Need to Know​


Stage 4: Transition

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Transition is the next stage. Employees start to move into new roles. In a 2020 LinkedIn study, 70% of laid-off workers reported finding a new position within three months after their termination. The retained workforce is also crucial at this stage. Research shows that at this point, the organization should 'hug its survivors'. Most of the survivors will tend to wonder if they will be next. Meetings can be an essential platform to reinforce appreciation of the remaining staff and thank them for their continued support as the organization progresses.


Stage 5: Recovery

The final stage of layoffs is recovery. This is when employees and employers begin to recover from the layoffs and move forward. Employers should rebuild trust among remaining employees and maintain positive relationships with former employees. An SHRM study showed that employers who communicate clearly and transparently with employees during a layoff are more likely to maintain positive relationships with their employees in the future.


5 stages of layoffs


Impact of Layoffs

Layoffs have traditionally affected the employee. However, the employee terminated is not alone in this. Layoffs impact the person, the economy, and the workplace. These are the three main components affected by layoffs. One framework to examine the impact on a large scale is PSB, which examines the stakeholders' perspective on global downsizing. This framework examines the global perspective of positive and negative stakeholders' behaviour during downsizing.


Related: 14 Facts About CEO Dismissals That You Should Know

Impact of Layoffs on Employees

Employees who are laid off may experience severe financial and emotional stress. In a 2020 Glassdoor study, 28% of laid-off workers reported taking on debt to make ends meet after losing their jobs. According to the same survey, 46% of laid-off workers reported that their mental health had deteriorated as a result of their job loss.


Additionally, studies have demonstrated that layoffs have a long-term impact on an employee's career. According to research in the Journal of Labour Economics, even years after being laid off, employees had lower salaries and were less likely to receive employer-provided health insurance.


Impact of Layoffs on Employers

Employers may suffer serious consequences as a result of layoffs. A survey by Challenger, Gray & Christmas, Inc. in 2020 found that the average layoff cost was $30,000 per employee. This covers the price of severance compensation, insurance for the unemployed, outplacement services, and other costs.


According to research, layoffs can have a detrimental effect on staff morale and productivity. The Journal of Applied Psychology published that layoffs might cause lower work satisfaction among surviving employees and higher turnover rates.


Impact of Layoffs on the Economy

Additionally, layoffs may have broader effects on the economy. According to the Bureau of Labour Statistics, in 2020, with a 6.7% unemployment rate, there were over 22.4 million layoffs and terminations in the United States.

 

Due to layoffs, government spending on social safety net programs like unemployment insurance and food assistance programs may rise. The Centre on Budget and Policy Priorities found that for every dollar spent on unemployment insurance benefits, $1.64 worth of economic activity is produced.


Conclusion

In conclusion, what are layoffs can be understood by following the discussed steps. Employers can minimize negative effects and maintain positive employee relationships by understanding the statistics behind layoffs. By planning carefully, communicating, providing support services, and focusing on recovery, employers can ensure productivity and profitability going into the future.

 
Brandon Murambinda is an Organisational Design and Development Consultant at Industrial Psychology Consultants (Pvt) Ltd, a management and human resources consulting firm.

Email: brandon@ipcconsultants.com or 

Visit our websites https://www.thehumancapitalhub.com/ and www.ipcconsultants.com


Brandon Murambinda
Consultant
This article was written by Brandon a Consultant at Industrial Psychology Consultants (Pvt) Ltd

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