Rescinding offers and laying off current employees is never easy, but unfortunately, they are a common occurrence in times of economic downturn. If you find yourself needing to withdraw an offer from a candidate or let go of an employee, it’s important to maintain fairness and compassion for everyone affected. Thankfully, following some best practices and leveraging the right software tools can help guide the decision-making process.
Looking for software that can help? Check out our HR Software Guide.
In this article...
How to lay off employees with clarity and compassion
As a leader, you may be wondering how to lay off an employee and do right by your people. Here’s how you can lay off an employee with grace and goodwill.
Make other cuts first when possible
All too often, we hear of mass layoffs in companies that simultaneously approved bonuses for their executive team. And while executives certainly deserve to get paid like the rest of the employees, it’s a bad look to give yourself a bonus while endangering your staff’s livelihood with unemployment.
Instead, look for other areas of your budget to make cuts before making layoff decisions. Maybe you have a big travel budget, but can attend virtual conferences or handle client meetings over Zoom. Or perhaps pausing those executive bonuses would allow you to keep more people.
“With careful planning, some amount of business risk can be minimized and some layoffs avoided,” said Amy Spurling, founder and CEO of Compt. “That said, a rapid and dramatic shift in the market cannot be predicted from a timing perspective.”
When employee layoffs can’t be avoided, you can at least soften the blow with thoughtful communication, severance packages, and letters of recommendation.
Avoid making empty promises
One of the biggest problems with the layoffs from some of these big-name companies is that they promised employees or new hires that they would be layoff proof, only to eventually let them go, rescind their job offers, or engage in temporary layoffs.
If you can’t be sure someone’s job is safe from cuts, don’t tell them it is. That’s the fastest way to leave a bad taste in the employee’s mouth and ensure it’s harder to hire new people when the business starts trending upward again.
Use consistent criteria for layoff decisions
Once you’ve decided workforce cuts are inevitable, you need to decide who will be leaving. This is one of the hardest personnel decisions.
“[You should] have transparent and clear reasons for why people are laid off,” said Chris Nicholson, data science team lead at Clipboard Health. “In some companies, that’s seniority. In others, maybe there is a strategic shift that means a whole team or business unit no longer makes sense. It’s the job of leadership to exude clarity and tell people why things are happening.”
Poor performance management — such as absenteeism, negativity, and failure to meet goals — is one possible criterion you can use to determine layoffs. Insubordination, ethical lapses, and criminal acts are always grounds for termination as well. In large-scale layoff scenarios, many companies focus on higher salaried employees, newer hires, and/or the lowest 10% on the work performance scale.
You don’t have to make these choices in a vacuum: Human resource management technology can help support data-driven decisions. For example, by using a human resources information system (HRIS), you can sort your remaining employees by seniority and determine how many of the newest employees you’ll need to lay off in order to make the necessary cuts based on their salaries. If you want to make sure you’re keeping your best-performing employees, use performance management software to see which workers always meet or exceed their key performance indicators (KPIs).
Create a transitional plan
Depending on the employer’s needs, you may find it beneficial to keep on a certain number of employees for a set period of time in order to transition the workforce smoothly. You can either identify specific employees you would like to stay on for this transitional period or ask for volunteers.
Whichever strategy you choose, you should offer incentives to impacted employees to encourage them to stay on. These incentives might include an increased severance package, a retention bonus, and a flexible schedule to accommodate interviews.
Communicate layoffs with transparency and respect
While handling layoffs via email might be easier for you, it’s rude to departing employees. At a minimum, they deserve a phone or Zoom call or even an in-person meeting. You can then follow it with a formal written notice or layoff letter to create a documentation paper trail; make sure the advance notice comes early enough to comply with federal and state laws.
“Whenever possible, the message should come from the employee’s manager or HR directly,” said Lisa Calick, director of human resources (HR) advisory services for SPRH at Wiss & Company. “Any business owner wants to make sure the message always shows compassion for the people being let go and provides an opportunity for those affected to have a voice, even if through a separate communication channel. Layoffs are tough but showing employees that you care goes a long way.”
During this conversation, you should be respectful and compassionate but also honest. Don’t lie about why employees are being let go — if there was a performance issue, say so; this can protect your company from wrongful termination lawsuits. You should also be direct and keep the conversation short; there’s no need to prolong it with excess small talk and pleasantries.
Provide outplacement support
If you are not letting the workers go for performance reasons, then providing outplacement support for them will create a lot of goodwill for your company despite the layoffs. Severance pay packages and unemployment benefits are a part of this, but career service programs go beyond just money — and they can help boost employee engagement and morale among remaining workers, too.
You should definitely offer letters of recommendation for workers who weren’t let go for performance issues. Providing assistance with the job search in the form of résumé reviews, interview prep, and referrals is also a great idea. This will show laid-off employees that you truly care about them and make it easier to hire them back if the need arises in the future.
HR software can help navigate layoffs
It’s important to remember that employment loss affects real people, and you need to approach them with the gravity they deserve. Layoffs should only be used as a last resort when there aren’t other options that make sense for the employer.
If you do have to engage in layoffs, make sure you’re using workforce development technology to inform those layoff decisions, so you have a clear picture of who you terminated and why.
Looking for technology that can help you evaluate your workforce? Check out our best HRIS systems software guide for recommendations.
Paylocity is a different kind of HR and payroll provider. We partner with you to create great software that delivers on your unmet needs – solving today’s challenges and designing solutions for the unknowns of tomorrow. And we stay your partner with dedicated, on-demand support every step of the way. Build a better future for your organization with a scalable solution focused on your business outcomes and priced for your budget.
Rippling is the first way for businesses to manage all of their HR, IT, and Finance — payroll, benefits, computers, apps, corporate cards, expenses, and more — in one unified workforce platform. By connecting every business system to one source of truth for employee data, businesses can automate all of the manual work they normally need to do to make employee changes.
Justworks makes it easier to start, run, and grow a business by giving entrepreneurs and their teams access to big-company benefits, automated payroll, compliance support, and HR tools in one simple platform. Using Justworks means that you can focus on what matters most – running your business. Justworks also offers access to ancillary benefits like 401, life/disability insurance, workers' comp, and more, all seamlessly integrated into the platform. The best part? Justworks offers 24/7 support.