Laid Off vs. Fired: The Differences and Your Employees’ Rights

There are many ways that an employee can make an exit from an organization, but there are really two categories for all terminations: voluntary and involuntary. Despite only two choices to pick from, popular culture—and the way we talk about termination in general—has muddied the waters, leading to some confusion about the differences between getting laid off vs. getting fired.

The two are actually very different, even if some people use them interchangeably. To help clarify, we’ll explore the key differences between being fired vs. laid off, including:

• What getting laid off vs. getting fired actually means
• The different implications for both types of terminations
• What benefits employees receive after being fired vs. laid off
• Alternative ways to fire employees voluntarily

Before we jump into getting laid off or fired, you need to understand the difference between voluntary and involuntary terminations in general.

A voluntary termination is when someone leaves a company of their own accord. This can be taking a voluntary layoff package, quitting to move on to a new role elsewhere, or even retiring. In other words, voluntary termination is when the employee makes the choice to leave.

An involuntary termination is the exact opposite. The employee doesn’t have a choice in the matter. Instead, the company chooses to let the employee go. Involuntary terminations are typically layoff events or firings, though being fired comes with an additional caveat that we’ll get to in a minute.

For example, if the person is laid off because the business is closing a plant location or is restructuring in some way, the employee has zero control. The move to downsize was a business decision that impacted their job without any input or action from them.

This means that the employee was involuntarily terminated, usually allowing them—in many states—to seek unemployment compensation while they hunt for a new role elsewhere.

(Pro tip: If you are holding layoffs, we highly suggest implementing outplacement services to help your departing employees land on their feet.)

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On the other hand, getting fired is technically within the employee’s control, even if they don’t want to think so. Normally, to get fired, an employee has to break a company rule, perform their job poorly, or do some other similar action that leads to their termination. That last part is key.

Firings occur because of employee action, meaning that the termination and loss of employment is technically voluntary. This also means that the person is typically unable to collect unemployment. The same is true if an employee leaves a company by simply quitting on their own.

In short, even though it seems like getting fired is involuntary—because who actually tries to get fired?—the reality is that the employee had control over the situation that led to that termination. As a result, that employee will typically not qualify to receive unemployment benefits.

This is why understanding the difference between getting laid off vs. getting fired is very important, especially for the employee.

As we said above, pop culture and conversational speech have led to a corroding of what these terms actually mean.

For example, a layoff is typically a temporary reduction event with employees remaining on a recall list, allowing them the possibility to work for the company again in the future. Of course, many layoffs become permanent reductions in force (or RIFs), but it is still not the same as being fired, even if it likewise results in permanent job loss.

This is because these two things—layoffs and firings—are viewed completely differently when the person looks to get hired elsewhere. If that person was previously laid off, they should avoid using the term “fired” as it could indicate they were terminated due to poor job performance.

On the other hand, if that person were fired, they should not represent themselves as having been “laid off” because the true circumstances of their previous firing will be discovered when their prospective employer checks their references. A better strategy in that case would be to put their job loss in the most positive terms possible and describe themselves as “terminated.”

To help clarify even further, here are the key points you should keep in mind.

When an employee is laid off, they experience an involuntary termination due to a business decision made outside of the individual’s control. Layoffs typically include employees signing a severance agreement and being offered outplacement support to help them land a new role.

Layoffs should not impact the employee’s ability to find a new role since layoffs are just a part of the business world. They do not reflect poorly on the individual employee. In fact, they may often garner sympathy because being laid off can be a very stressful life event.

Being fired, on the other hand, is when an employee is terminated because they broke too many company rules (or committed a major offense), underperformed in their role over a significant period of time, or stopped showing up to work. Whatever the reason, being fired is a voluntary termination because the employee made choices that led to their termination.

Being fired can then negatively impact the employee as they move to a new role because it indicates that the employee did something to get themselves fired.

The Differences Between Laid Off vs. Fired

This point is typically meant for employees, but is also important for employers to uphold. For the employees, using the wrong term in an interview can seriously impact their chances of landing the new role. Again, this stems from the fact that pop culture quite often uses “fired” to mean “laid off.” But as you can now see, they are very different.

When it comes to employers, it’s also important to choose your words wisely. Typically, a firing and a layoff have vastly different procedures. Using terms like “giving someone the ax” or “canning people” carries a fired connotation when it may have been a reduction event. So, employers should be exact and careful to always use the correct terminology.

In the end, whether employees are fired or laid off matters. Knowing the difference can help them navigate future job pursuits, and avoid lying to their future employers—who will most likely call their references—which is never a good idea.

Want to learn more about layoffs? Get started with our comprehensive guide:

When it comes to laying off or firing employees, it’s important to understand what rights your employees have and what benefits extend to them, given their specific circumstances. There are important distinctions between laid off vs. fired unemployment benefits and other employee rights that you’ll need to know how to navigate for your impacted employees.

When an employee is fired, it may seem like there are many legal hurdles to jump over, but that’s necessarily not the case in most states because they fall under “at-will” employment.

At-will means that employees can be terminated whenever the employer deems fit and for whatever reason. Now, even with at-will employment in place, it’s generally not considered a good idea to randomly terminate employees for no reason, especially if it’s a layoff. This is why at-will is usually only discussed in the case of firing problematic employees.

After a person is fired, the company generally doesn’t need to continue extending any benefits. The employee doesn’t usually receive severance or outplacement services. You can think of a firing as a clean break with little to no support for the employee. Employees who are eligible can still sign up for benefits such as COBRA health insurance coverage, but that’s a bit separate from the discussion here.

When an employee is laid off, they are usually extended a slew of benefits that each have a specific purpose. The biggest benefit is a severance package. Not only does this package help employees financially as they find a new role, but it also serves as a waiver to protect the employer from wrongful termination lawsuits.

Outplacement services are also a standard offering during a layoff. Outplacement supports departing employees during their job hunt by pairing them up with coaches, helping them write resumes, and supporting their transition from start to finish.

These benefits are all offered to greatly aid an employee on their journey when a layoff is an involuntary layoff made due to a business decision. The more a company can do to help an employee, the better the layoff will be perceived by surviving staff members, stakeholders, and the general public.

In terms of rights, layoffs come with various rules depending on the size of the event. For example, a mass layoff requires a company to adhere to the Worker Adjustment and Retraining Notification (WARN) Act or the Older Workers Benefit Protection Act (OWBPA).

When it comes to any termination though, we suggest you work closely with your legal team to ensure you are following all local, state, and federal laws.

While another pop culture myth surrounding firings may make them seem like a quick decision made by an employer, this is generally not the case in most situations unless the person has egregiously broken company rules or created an unsafe work environment.

Those cases certainly can happen, but firings typically occur over a longer period of time as HR and managers make a case for termination. If the decision is ultimately made to let a person go for whatever reason, employers may still not want to actually fire the employee so as not to hurt their future careers or give them reason to be upset with the employer.

This means that many organizations opt to “fire” someone by technically laying them off. This can be achieved by offering them a voluntary package or rendering their role redundant. Either way, it allows the employee to take advantage of layoff benefits such as severance and outplacement. Performing a firing this way can be a good move to ensure all parties separate on the best terms.

Another alternative way to terminate an employee without the negative repercussions of a firing is to hold a furlough, which is an involuntary, unpaid leave of absence from work for a specific period of time. However, this should only be used in situations where the company wants to allow the impacted employee the opportunity to return to work at a later date. This will often not be the case in situations where the employee is being terminated due to poor work performance or company rule violations, but it’s still an option to keep in mind when applicable.

In the end, knowing the difference between a layoff and a firing is crucial. For HR professionals, you should always be clear with your employees about which category their termination falls into.

Many organizations also offer voluntary layoffs as an alternative way to fire people, though this depends on the situation, the person being let go, and many other factors. Organizations may do this to ensure that the employee being terminated doesn’t have a difficult time finding a new role in a different organization since the termination isn’t technically voluntary.

Whenever terminating employees, it’s important to note that a firing is a voluntary termination because a rule was broken or an action was taken by the employee to directly cause their loss of work. A layoff, on the other hand, is completely out of an employee’s control, allowing them to collect unemployment (most of the time) and seek benefits from the company.

Remember to always consult your legal counsel and your company policies before terminating employees to ensure that you are following all of the applicable laws in your region.

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Josh Hrala

Josh is an HR journalist and ghostwriter who's been covering outplacement and offboarding for over six years. Before pivoting to the HR world, he was a science journalist whose work can be found in Popular Science, ScienceAlert, The Huffington Post, Cracked, Modern Notion, and more.