What is Layoff?

A layoff is a situation wherein the employer terminates the employees either permanently or temporarily due to low sales, financial crisis, or material shortage The employee layoff has no relation to the performance of the employees. The positions are laid off primarily due to financial reasons, some of which are mentioned below;

  • Cost reduction in the company
  • Combining two branches of a company/ mergers
  • Loss of funding
  • Advancements in the technology
  • Relocation of a company

For example, let's say Amit is working in a firm as a supporting staff.

  • The firm started experiencing a shortage in cash flow with some other major financial crises.
  • The HR department decided to lay off 10 employees and reduce the company's costs.
  • Amit's position is also laid off with the other 10 employees.


Frequently Asked Questions

What is the difference between layoff and furlough?

Furlough is a mandatory leave taken by the employees who are expected to return to work. In comparison, a layoff can be a permanent or temporary termination of the employee from employment. In both conditions, the employee is not at fault. Instead, the reason is fewer sales, financial meltdown, etc.

How can HR handle layoffs?

HR can follow the strategies mentioned below to handle layoffs carefully and clearly.

Understand the distress

Layoff is challenging for everyone, but acknowledging the impact, keeping the whole process transparent, and answering the employee’s questions will enable sympathetic understanding and avoid rumors.

Don’t promote favoritism

During layoffs, job positions are reduced, affecting the employee. If the dismissal is performed with bias, the organizational reputation can be at risk in the future. Instead, treat every employee equally.

Offer support

HR can provide support to laid-off employees to boost their morale. This can include redeployment, separation package, employment assistant courses, and involving a career transition firm.

Develop initiatives for the future

After eliminating a position, it becomes essential to retain and engage the existing staff. The role of HR in such a situation becomes crucial as they build plans for skill development that drives both individual and company growth.

What criteria should be considered when laying employees off?

An HR should consider the below points before selecting employees in downsizing.

  • KSAs and versatility
  • Educational and experience level
  • Punctuality in workplace
  • Work potential and attitude
  • Quantity and quality of work
  • Employment period in the company


What can an employee do in the situation of a layoff?

A layoff is a professionally excruciating situation for employees as they receive termination without their blame. Apparently, they start feeling rejected and that their work was unsatisfactory. But instead, they can surround themselves with positivity, take a break from professional life, search for new opportunities, and spend time on their wellbeing.

Does an employee’s health insurance get terminated with layoff?

Yes, an employee’s health insurance based on his job will end when he is laid off. Though, if the return date is previously determined, it can be retained.

What mass layoff means?

The termination of around 500 employees working full-time or at least 33% of the workforce during 30 days is called mass layoff.

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