Layoff, Reduction, and Recall Policy [Template]

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Sometimes in business, things don’t always go according to plan. When you need to reduce spending in order to stay afloat, layoffs can be an option that gets put on the table. Layoffs are one of the most difficult things you can face as a manager or supervisor, so understanding how the process works and what policies to put in place is important.

Large-scale layoffs can drastically affect morale and job satisfaction for your remaining employees, so they are often used as a last resort during hard times. Preparing your employees should an event like this happen to your company is very important for both you and your staff.

Key Takeaways:

• Layoffs can happen for a variety of different reasons, including relocation, going out of business, or cost reduction.

• Layoffs should not come as a surprise to your employees, meaning you should be open, transparent, and honest with your teams.

• Always coordinate with your human resources team when creating a layoff policy.

What Is a Layoff?

A layoff can sometimes mean two different things. First, for non-union and contract-covered staff, layoff refers to the elimination of their position, the reduction of a position’s full–time employment, or a reduction in the time the position takes due to lack of work, low funds, or a reorganization.

For regular full-time staff, a layoff is the elimination of a position or a team due to limited work, low funds, or a reorganization. Typically, companies that lay off their employees do so permanently; however, there are cases where companies utilize temporary layoffs in order to relieve their financial burden to get to a place where they are ready for that staff again.

Why Do Layoffs Happen?

Depending on the company’s needs and its financial health, the leadership team of an organization may decide to turn to layoffs. If you’re worried about a layoff at your company, knowing the common reasons why layoffs happen can be helpful. Here are some of the most common reasons layoffs happen.

• Relocation. Sometimes companies decide it’s more profitable to relocate the company to elsewhere in the country. This may be because of space constraints or to be closer to a city that’s valuable to the bottom line. If employees cannot or are not willing to relocate, they may be laid off.

• Going out of business. If a business closes or is close to closing its doors, it will begin with layoffs, typically in waves. They may choose to retain the staff that can maintain minimum operations within the business, but when the company finally dissolves, the remaining employees may be laid off too.

• Cost-reduction. Sometimes companies must cut costs. This can be for any reason, like the COVID-19 pandemic, needing to pay off debts, or losing financial backing from investors. The company may perform layoffs to save money or allocate those funds elsewhere.

• Merger or Acquisitions. When two companies merge together, or one company acquires another, typically there is overlap in a variety of different departments. Sometimes employees will be retained to join their counterpart team, but sometimes they may be laid off.

How to Handle Layoffs Ethically

Layoffs can not only be devastating, but they can potentially be embarrassing for your employees. As an employer with a brand image to maintain, you’ll want to make sure you handle layoffs, should they happen to your company, with dignity. This helps both your laid-off employees and the employees who remain at your company.

First, be sure you’re often communicating. Layoffs shouldn’t come as a surprise to your employees if they know things are going poorly. Discussing and acknowledging where your business is keeping people involved and may even aid the leadership team in solving problems. Don’t lie to your employees or try to downplay the severity of your situation.

When preparing to conduct layoffs, don’t beat around the bush. Discuss the question at hand and let your employees know with plenty of time that a layoff may be imminent. Additionally, don’t delegate the layoffs to someone the employee doesn’t know, like the HR team. Managers should always conduct layoffs to their team in a one-on-one conversation.

When delivering a layoff message to your employees, make sure you do so with respect and listen to your employees’ reactions. People may need to vent, want to be alone or return home, or need an explanation. Be prepared to provide these individuals with what they need to feel better about the situation.

Finally, ensure you can provide your employees with outplacement support. Sometimes companies will provide six months of a job-hunting service or access to different tools that can help them find placement once they’re laid off. This helps these individuals feel like you’re treating them as people, not as a monetary constraint.

How to Write a Layoff Policy

There are a number of steps when writing a layoff policy for your company. First, you’ll want to coordinate with your broader team. Notify human resources and collaborate on the reasons a layoff may happen. Think through the reasons why a layoff might happen and determine any post-layoff action that may be applicable to your company.

Next, consider a recall process. This would be a process in which employees who are laid off may be kept on a recall list for up to six months or until management decides the layoff is permanent. This may include things like credit for seniority or reimbursing the employee with some pay or healthcare benefits they may have lost during their leave.

You may also want to consider things like paid time off that employees have accrued or unemployment rights. Unemployment rules differ by state, so you may need to contact your local unemployment office for guidance on how this works so you can better guide your employees.

Another thing to consider is severance pay for laid-off employees. It’s important to remember that even though this is a devastating time for your company, your employees will also feel the loss and may even struggle to support themselves. Severance pay, if appropriate for your situation, is a great way to ensure a smooth transition for your employees.

Layoff Letter Template

To inform your employees of layoffs, you may choose to send a digital or hard-copy letter. This letter would provide the employee with all relevant details regarding their layoff, making the process as straightforward as possible. Below is a sample template of a layoff letter.

Layoff Policy FAQ

1. Are employees required to give layoff notice?

   Based on the Fair Labor Standards Act, an employee is not guaranteed notice prior to termination. However, there may be differences based on individual employee contracts, so be sure to check your paperwork.

2. How do companies decide who to lay off?

   Companies typically decide who to lay off based on your term of employment.

   Organizations will usually start with those who have been with the company for the shortest amount of time. Job function may also play a critical role in these decisions.

3. How do you handle a layoff?

   The best way to handle a layoff is to recognize it’s painful and grieve the loss. If you are a human resources professional, it’s important to remain objective, plan carefully, and treat all of your employees with respect.

Author

Caitlin Mazur

Caitlin Mazur is a freelance writer at Zippia where she has written 140+ articles that have reached over 1 mil viewers as of June 2023. Caitlin is passionate about helping Zippia’s readers land the jobs of their dreams by offering content that discusses job-seeking advice based on experience and extensive research.