How to Layoff Employees: The Complete Guide
October 03, 2017 by Josh Hrala
Dealing with a layoff is stressful for everyone involved. From the employee’s affected by the reduction in force (RIF) to the HR managers tasked with carrying them out, no one is going to have a good time.
However, the sad fact of the matter is that layoffs are a mandatory part of the business world. There are, after all, numerous reasons for downsizing employees, ranging from financial to preemptive workforce planning needs.
This means that having a great HR layoff strategy – one that understands the complete process of downsizing while also understanding the ethical way to lay off of employees – is of utmost importance.
But what are the best practices for managing layoffs? How can you let people go in a way that is dignified and takes into account the employee’s emotions and needs?
Well, that is exactly what we are going to cover in this guide, which will set you up to succeed whenever a layoff may occur. The first step of the process is to make sure you have a layoff script at the ready for when the moment arises.
If you don’t have one already or want to make sure yours is up to date, you can download our complimentary, customizable layoff template here:
Now that you have a layoff script on hand, let’s take a look at the overall layoff plan from start to finish to ensure that everything is in order for when the time comes from you to actually hold the meeting.
The Layoff Meeting: Step One
The first step in this process is to nail down what needs said in the layoff meeting. This is where the script above comes in handy.
Basically, the notification meeting should be broken in various parts that flow together, making sure that you give all of the important details to your staff member(s) while also making sure to give them the space and time they need to process.
The first rule of the notification meeting is to get straight to the point. Don’t talk about the weather. Don’t ask what they are doing this weekend. Nothing you can say as an icebreaker is going to make the news feel any better. When the employee enters, explain what is happening.
Tell them the reason for the layoff, explain that their job is one of the ones impacted, and then give them a second to process the info they just heard.
This section is important. While you should cut out as much small talk as you possibly can, you should also have a note in your layoff script that allows for the employee to vent their frustrations within reason.
Of course, this section of the layoff meeting largely depends on your corporate culture and the employee being let go. You don’t want to let the employee make a scene or go off the rails, but give them enough space to let them say what they need to say.
Layoffs are an emotional event and giving your outbound employee space to air their grievances is a solid move. While they are doing so, actively listen to what they are saying. Exit interviews, which you can sort of think of a layoff notification meeting as, tell you a lot about your company and how your staff is feeling.
While some of what the employee says may be out of a gut reaction, their words are still valuable. For some employees, they will want to speak and others will want to get out of there as soon as possible. Try to read what the employee wants and be ready to see either one.
The Layoff Meeting: Step Two
Now that the person has been officially notified that their position has been affected by the RIF, it’s time to transition the meeting to the severance agreement.
We will talk about all of this in more detail in a little bit, but the first thing you need to tell the employee is when their last day of work will be, when their last paycheck will be sent, and all of those small – but important – details that need said.
“Employers must ensure that they are prepared for this meeting and that all information has been collected and available to the employee. Employers will want to be sympathetic and explain the reasons for the layoff, review health benefits and COBRA election procedures, 401(k) options, outplacement services, and the rehire process, if available.”
Again, this is where a layoff script comes in because it can help you transition from the ‘listening’ stage that ends the first part of the meeting to the informative, middle part of the meeting.
After these details are explained, the severance agreement given, and any questions the person has is answered, you should go into benefits. Will you be giving the person a severance package and outplacement services so that they can transition to a new role in a new job? You should be.
Once these packages are all explained in detail, it’s time to move on to the last stage of the meeting.
The Layoff Meeting: Step Three
The final part of the layoff meeting is highly influenced by your company’s culture. This is where you end the meeting, and that means either letting your employee return to their desk to get their items or having them leave straight away after you collect their ID badge, keys, and other objects that belong to the company.
There are pros and cons for both of these options. Let’s explore them.
By letting your employee return to their desk you show them that you trust them not to do anything on their way. This is, without a doubt, the wrong move in many ways, though, because it can be super awkward for your surviving staff and the employee.
Other co-workers will ask them what happened, opening up weird conversations, and may also let the exiting employee damage company property.
“Now, you’re not looking to do anything untoward, but some companies become incredibly paranoid after they fire someone. And for good reason — people you have just fired are not likely to be feeling warm and fuzzy toward you,” Susan Lucas, The Evil HR Lady, reports for CBS News.
“Plus, there’s that whole awkwardness of having you standing right there, in your cube, while your former coworkers try to figure out what to say to you. ‘Umm, tough deal, Bob!’”
Because of these concerns, it’s generally best to funnel the employee out of the building in a way that is mindful of what they are going through. One of the best ways to do this is to have an outplacement firm on hand to talk with the employee before they go, allowing them to start their job hunt right there on the spot.
Not only does this kickstart the process, it allows your staffer to cool down and realize that their best interest is still valued.
So, while it may seem like it might be a nice gesture to allow your employee to leave on their own accord, it can really make things weird, stoke emotions, and even damage your assets if you do. Because of this, it’s important really consider this step. After all, just because you broke the news and have ended the meeting, doesn’t mean that the employee feels any better.
The good news is that there are ways to shore up your layoff plan to make sure that your outbound staff do feel better about the whole situation, which leads to the next part of our guide.
Make Sure You Have a Great Severance Package
Having a great layoff script for managers is only one step in the process when it comes to offboarding employees. The next thing you need to have nailed down before a RIF is your severance agreement.
Let’s get into it.
What Is a Basic Severance Agreement?
As a bit of a refresher, a severance agreement – sometimes called a severance package, severance terms agreement or severance agreement form – is a legal document between you and your outgoing employee that states all of the specific terms and conditions applied during the employee’s termination.
You can think of a severance agreement as a waiver or release of liability, which protects your company from lawsuits. As you can probably guess, the legal aspect of this document makes it incredibly important and also requires you to work with your legal team to ensure everything is in order.
The common word of advice about severance packages is to make sure you follow all of the Equal Employment Opportunity Commission’s (EEOC) guidelines, which are set in place to protect workers of all backgrounds, ages, and ethnicities from unlawful termination.
The EEOC changes these guidelines regularly to ensure proper protection, which means that you need to stay up to date on what they change to make sure you are not violating anything that could land you in hot water.
“Most employees who sign waivers in severance agreements never attempt to challenge them,” the EEOC states in their guidelines.
“Some discharged employees, however, may feel that they have no choice but to sign the waiver, even though they suspect discrimination, or they may learn something after signing the waiver that leads them to believe they were discriminated against during employment or wrongfully terminated.”
In other words, make sure your employee fully reads the agreement, signs voluntarily, and isn’t pressured into the act.
This brings us to our next point:
How to Deliver a Severance Agreement
So, while it may seem a bit daunting to hand over a legal document to an outgoing staff member, which comes off as a bit cold, it’s actually not something you need to be stressing about. After all, this document is an agreement between both of you that you accept the terms. It’s like a handshake that holds up in the court of law.
The agreement should be delivered during the latter part of the notification meeting right before you get into explaining other benefits like outplacement services.
Here’s how to handle it:
Step One: Provide Consideration Time
You might want to have the employee sign the document right there on the spot. This is the wrong move because the employee needs time to read it over, ask their lawyer or another expert about the terms, and then make their final decision.
“If the employee is younger than 40, there is no specified period of time which the employee must be given to sign the severance agreement,” SHRM reports.
“However, the amount of time given to an employee becomes a factor that a court considers in determining whether a waiver of Title VII, the Americans with Disabilities Act (ADA) or other non-ADEA claims is “knowing and voluntary.” Generally, the more time an employer offers, the stronger the employer’s position.”
We recommend giving employees 21 days to review and then sign their agreement. Typically, people sign it much faster than that and some will even sign while in the meeting. Still, showing that you want them to read everything over and make a logical, well-founded decision is vital. The decision to sign the document must be voluntary. If not, you are in trouble with the law.
Even after the form is returned, give the employee 7 days to change their mind. This proves that they did so honestly and voluntarily, making the document truly hold up if you should find yourself in court.
“Even if an employer provides ADEA time frames to employees younger than 40, it does not automatically follow that the employer must or should extend ADEA revocation rights to those employees,” SHRM continues.
“Under the [Older Workers Benefit Protection Act], employees must be given seven days to revoke their waivers of age claims after they sign severance agreements. This right to revoke applies in the context of individual and group terminations.”
Step Two: Consider a Non-Compete Agreement
This section is one of those parts that is solely up to you. Some businesses like to have a non-compete agreement built into their severance agreement that states the employee cannot work for the company’s competitors.
The best bet here, like many of tips provided in this article, is to work with your legal team to discuss if a non-compete agreement is needed.
If it is, we recommend jotting down a list of your competitors beforehand to have them ready to include in your agreement.
There are obviously pros and cons to this because if, say, your employee has had a career in this field for a very long time, cutting them off from working in it will make them not sign the form. At the same time, it could allow them to move on to one of your competitors, giving them a boost.
It all depends on your corporate culture and what industry you are in.
Step Three: The Waiver
Okay, this is the most important part of the whole thing, but it’s also the part that takes the least amount of time to explain.
Inside your severance agreement, you need to have an explicit release of liability and you MUST have a whole paragraph that goes over what this is and how your employee can reject it.
You CANNOT prohibit your employee from filing a claim with the EEOC. You must go over their right to do so. This section needs to be aided by your legal team to make sure everything’s in order. Just remember, be clear and concise, make sure the employee understands the waiver, and then make sure you tell them that they have the right to file a claim with the EEOC if they should choose.
Step Four: Special Rules and Other Things
You must understand that, given the employee’s age, that sometimes special things must be included into the severance agreement, too. For example, if your staffer is over 40, you need to give them a longer time to review and the sign the agreement.
You also must advise them to review the document with a lawyer in writing. These are set in place to make sure no discrimination takes place.
We recommend having a few severance agreements on file that work with these special cases so you don’t have to run around trying to draft a new one when something comes up.
To help with this part of the layoff plan, check out this infographic for a complete rundown of what we just covered:
Finally, we are on to our third and final step in the RIF process: benefits.
The Final Step: Outplacement and Other Benefits
Like we said above, there are a lot of things you need to consider when letting someone go. While everything we’ve covered up to this point has been about handling the meeting properly – and legally, too – you now need to shift your focus to what happens when the person is actually gone.
It’s never easy to find a new job, especially one that is within a specific industry. If an employee is let go, the biggest benefit you can give them is the ability to find a new, meaningful work elsewhere. This is where outplacement support comes in.
What Is Outplacement?
To sum it up briefly, outplacement is a service provided to outbound staff members that allows them to easily transition into a new role outside of the company.
You can think of outplacement as a support system that your employee can lean on during the tough job search.
The service grew in popularity during the last recession when countless companies were sued by their outbound staff members who were left without a support system to help them continue in a role.
“While about 8 percent of Americans are unemployed, nearly a quarter of Americans say they were laid off at some point during the recession or afterward, according to the survey. More broadly, nearly eight in 10 say they know someone in their circle of family and friends who has lost a job,” Catherine Rampell reported for The New York Times back then.
“Of those laid off in recent years, nearly a quarter said they still had not found a job. Re-employment rates for older workers have been particularly bad, with nearly two-thirds of unemployed people 55 and older saying they actively sought a job for more than a year before finding one or had still not found work,” she continued further down in the article.
With so much at stake, many of these workers fought back with lawsuits, causing outplacement to become an almost mandatory aspect of layoff plans across the country.
What Does Outplacement Typically Involve?
While the focus of any outplacement provider is to get your staff back to work, there are quite a few steps in the process that differ from firm to firm. Here are the basics, though:
First, the employee will be interviewed by the career transition coach to see what job they want, if they want to work in the same industry, what jobs may or may not violate a non-compete clause, and even if they’d like to start a new career in another field. This interview stage is meant to serve as a way for your staff and their coach to start laying out a plan for success. It teaches the coach about the client while also letting the client do some soul searching to see what’s right for them.
Once that’s all ironed out, the coach and staff member will work together to build social accounts like LinkedIn, update resumes, learn about cover letters, and basically go over all of the small, paperwork-heavy tasks that you need to do when you start gearing up to search for a new job.
During this stage the outplacement coach will also prep the employee on how the job market is currently working. This is an important step because as technology continues to shape the way we live and work, job markets change rapidly, including where and how you find new work.
One of the most significant aspects of this section is to train the employee to be a better job hunter for the future as well as today. Think about: if you worked for a company for the last 15 years, the current job market is going to look unrecognizable today. Learning how to navigate this new world will be beneficial for years to come even after an initial placement is made.
When all of the groundwork is laid out, the client – aided by an expert coach – will start to apply for jobs using online listings, LinkedIn, and many other methods, which will eventually land them in a new role that they love.
Okay, But Why Should I Care About Outplacement Services?
The business world is all about the bottom line, right? Why should you spend money on a staff member who is no longer with the company? After all, a layoff event is usually meant to save the company money not make it spend more.
While these are all good points many business owners make, it’s wholeheartedly untrue.
Let’s do another thought experiment.
You were just let go from a company you worked for for a decade. The layoff was sudden and didn’t come with much warning. Upon going through the notification meeting, you come out the other end with a small lump sum severance payment and that’s it. How will you feel?
Not only is it not your fault that you lost your job, but now you have to find new work that pays enough to keep the lights on before that payment runs dry. You see your retirement fund dwindling. You wonder what will happen to your healthcare. In other words, you’re stressing out.
This is a perfectly normal reaction to have. One that many of us would find ourselves in if we were in that position.
So, with that in mind, the first reason you should provide outplacement services is that it is simply the right thing to do for a staff member who gave 10 years (or any amount) of their life to you.
If that doesn’t float your boat, though, there is another reason, too: your corporate brand.
Layoffs are seriously detrimental to your company’s outward appearance. The general public looks at layoffs as a signal that something internally is going awry, making them skeptical to invest, shop or do business with your company.
If you botch a layoff, that makes things 100 times worse because now the public has a reason to not give you their time of day and your ex-employee, the one that you threw out the door, can possibly be at the helm of all of this chaos.
So, in a way, outplacement is added protection for your company because it shows that you really do care about the continued success of your staff even when they leave the organization. It reduces the amount of resent the staffer may have for being let go, allowing you to continue planning out your workforce without all of the headaches.
There’s another reason, too: a reduction in stress.
As an HR manager, you will be the one tasked with letting people go from the company. This process is never fun or easy to do, especially if it’s with a staff member who has been around for years.
By providing outplacement services, you will be able to rest easy knowing your staff member has all of the tools they need to find a new job. This reduction in stress (a ‘RIS’, if you will) will also be felt by the staffer let go and the surviving staff.
If you kick people into the street, you folks left working for you will wonder if you’d do the same to them. This can cause your surviving staff to jump ship at an alarming rate, giving you a new problem: not enough trained staff.
“A new study indicates that layoffs often prompt demoralized survivors to quit. The resulting unexpected staff shortage can hinder efficiency, and the company incurs costs as it scrambles to find and train new people,” reports the Harvard Business Review.
“As if that irony weren’t painful enough, career-development programs, which of course are partly aimed at improving retention, appear to have the unfortunate effect of worsening turnover after a layoff.”
Instead of giving them that thought, let them know that if they were let go, they’d be given everything they could ever need to move to another job, which will boost your retention and send the right message.
So, why is outplacement important? Many reasons. The main ones are that outplacement is simply the right thing to do while it also serves as source of brand protection and stress reduction. It’s a win-win for everyone involved.
Okay, now that we know the importance of outplacement, here’s what you need to get started finding a provider.
Outplacement Providers: What Makes Them Unique
As you can probably tell, outplacement firms all want the same thing: to get your employee back to work as fast as possible.
While this is true across the board, outplacement firms often differ when it comes to the details and processes used to achieve that goal. To help you figure out which firm uses the right processes for you, let’s break it down really fast.
Oh, and before we do, we’d like to offer you this complementary outplacement buyer’s kit that will go over everything we talk about here in greater detail. You can download it here:
Understand The Outplacement Process
The first step in gauging any provider is to look at how they actually perform the outplacement process. Do they use all of the technology available to them? Does the process make sense as a whole? Are their coaches experts? Do they keep up with current trends? If you were providing outplacement yourself, do you feel like you would do a better job?
These are just some of the many questions you can ask yourself about your possible outplacement firm. You can read a whole slew of other questions here, which will prep you for shopping around.
Here are a few key things you definitely need to consider though:
If your outplacement services provider uses term limits, you may want to reconsider using them.
What’s that mean?
Well, like with other services, outplacement firms can make you use a term limit on their service, meaning that if your staffer isn’t placed in a new role by a certain date, they are out of the program, forcing them to go about the job search alone.
Using a term limit can cause all of that resentment you want to protect against to come flowing back in. So, save yourself some hassle and find a provider that doesn’t use them or has a super flexible system.
In today’s world, outplacement providers need to use all of the technologies they can to get your staff member back to work. This means that they need to have virtual outplacement technologies that allow people anywhere to use their service at any time they want.
By using virtual outplacement, the client can access educational tools any time they need or want to. It also offers a great platform for coaches to help the client go through the entire process.
If you’re working with a firm that still requires clients to come to brick-and-mortar locations, it’s time to find a more technologically-driven partner to work with because outplacement can and should be a service offered online, allowing your staff member to use it at their convenience wherever they happen to live.
Not only is this more convenient and, therefore, more successful because your employee will fully utilize it, it also shows that your provider is current with job market trends – all of which are online – and is able to navigate the digital landscape.
The last major consideration you should have when shopping for an outplacement firm is to gauge how much they charge in retainer fees.
Like law firms and other service providers, outplacement companies love retainer fees for one simple reason: it’s free money.
By allowing you to use their service – which they will then bill you for anyway – they can keep you paying retainer fees for years even if you never end up using the service.
This is great for the companies but bad for you.
What you should do instead is to look for an outplacement package that foregoes the retainer fees and allows you to be a strategic partner with them instead. This is when you know you will use their services because they offer more than just outplacement. For example, at Careerminds we offer outplacement assistance alongside retirement lifestyle planning, leadership development training, and workforce planning assistance.
Since we offer a full array of transition services, we strongly believe that we will be working together more than just for outplacement. In fact, we charge no retainer fee at all, allowing you to choose what service and when you’ll use that service at any time.
P.S – We are also the only firm to forego term limits, too, working with your staff until they are placed for a fixed rate.
Outplacement Firm Listings and Finding A Provider
Now that you are aware of what to look for, how the process works, and have a general understanding of outplacement as a service for terminated employees, how do you actually find a provider?
There’s no super easy way of doing this. There are no sure fire ways of finding the perfect company for you right off the bat. Instead, you need to search around using outplacement firm directories or outplacement firm listing sites and then see demos from the places that interest you.
While in the demo, look for the things we’ve mentioned above and make sure the outplacement provider follows all of the rules.
If you are considering using Careerminds, you can schedule a demo with us here:
How to Lay Someone Off: A Complete Overview
We talked about a ton of different things that you need to consider when laying someone off. Let’s have a refresher
How to layoff employees
To recap, here’s how to layoff employees
- Plan the meeting in advance
- Use a layoff script to stay on track
- Know the laws and regulations, specially for employees over 40
- Form a severance agreement with your legal team
- Offer benefits like outplacement services
You want to make sure the initial layoff meeting goes off without a hitch. To do this, we highly recommend using a layoff script that can keep you on track during this stressful event while simultaneously giving respect to your outgoing staff.
You can grab ourlayoff script here and learn more about the process here.
Next, you need to form a severance agreement with your legal team that closely follows all of the laws and regulations set by the EEOC and other governing bodies.
This document is presented to the employee at the end of the layoff notification meeting and also goes over the benefits the employee will receive.
Outplacement is the number one benefit to add to your severance agreement because it shows your continued support for the staff member even after they have left your company. Outplacement protects your brand, reduces stress internally and for the participant, and saves you from other damaging things like lawsuits.
If you follow all of these steps in order, you will have layoff plan that you can use well into the future. We understand that layoffs will always be a little stressful, but a proper plan can go a really long way.