Layoff
A layoff is the temporary suspension or permanent termination of employment of an employee or, more commonly, a group of employees for business reasons, such as personnel management or downsizing an organization. Originally, layoff referred exclusively to a temporary interruption in work, or employment but this has evolved to a permanent elimination of a position in both British and US English, requiring the addition of "temporary" to specify the original meaning of the word. A layoff is not to be confused with wrongful termination. Laid off workers or displaced workers are workers who have lost or left their jobs because their employer has closed or moved, there was insufficient work for them to do, or their position or shift was abolished. Downsizing in a company is defined to involve the reduction of employees in a workforce. Downsizing in companies became a popular practice in the 1980s and early 1990s as it was seen as a way to deliver better shareholder value as it helps to reduce the costs of employers. Indeed, recent research on downsizing in the US, UK, and Japan suggests that downsizing is being regarded by management as one of the preferred routes to help declining organizations, cutting unnecessary costs, and improve organizational performance. Usually a layoff occurs as a cost-cutting measure.
Terminology
s are often used to "soften the blow" in the process of firing and being fired. The term "layoff" originally meant a temporary interruption in work. The term became a euphemism for permanent termination of employment and now usually means that, requiring the addition of "temporary" to refer to the original meaning. Many other euphemisms have been coined for " layoff", including "downsizing", "excess reduction", "rightsizing", "leveraging synergies", "delayering", "smartsizing", "redeployment", "workforce reduction", "workforce optimization", "simplification", "force shaping", "recussion", and "reduction in force". "Mass layoff" is defined by the United States Department of Labor as 50 or more workers laid off from the same company around the same time. "Attrition" implies that positions will be eliminated as workers quit or retire. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. "Redundancy" is a specific legal term in UK labour law. When an employer is faced with work of a particular type ceasing or diminishing at a particular location, it may be perceived as obfuscation. Firings imply misconduct or failure while layoffs imply economic forces beyond the employer's and employees' control, especially in the face of a recession such as the one that began in the late 2000s.Common abbreviations for ''reduction in force''
RIF – A generic reduction in force, of undetermined method. Often pronounced like the word riff rather than spelled out. Sometimes used as a verb, as in "the employees were pretty heavily riffed".eRIF – Layoff notice by email.
IRIF – Involuntary reduction in force – The employee did not voluntarily choose to leave the company. This usually implies that the method of reduction involved either layoffs, firings, or both, but would not usually imply resignations or retirements. If the employee is fired rather than laid off, the term "with cause" may be appended to indicate that the separation was due to this employee's performance and/or behavior, rather than being financially motivated.
VRIF – Voluntary reduction in force – The employee did play a role in choosing to leave the company, most likely through resignation or retirement. In some instances, a company may exert pressure on an employee to make this choice, perhaps by implying that a layoff or termination would otherwise be imminent, or by offering an attractive severance or early retirement package. Conversely, the company is not obliged to accept an employees decision and may not accept every employee who volunteers for a VRIF.
WFR – Work force reduction.
In the public sector
Following the recession of 2007–2008, the public sector has seen significantly smaller job growth in employment versus the private sector, and layoffs have been used to ensure sustainability. As the public sector declines, the demand for services from the private sector declines as well. Layoffs in the public sector have put limitations on the growth rate of the private sector, inevitably burdening the entire flow of markets.Unemployment compensation
The risk of being laid off varies depending on the workplace and country a person is working in. Unemployment compensation in any country or workplace typically has two main factors. The first factor of unemployment compensation depends on the distribution of unemployment benefits in a workplace outlined in an employee handbook. The second factor is the risk of inequality being conditioned upon the political regime type in the country an employee is working in. For example, in Canada, Dorion states that white-collar workers who have been made redundant receive higher re-employment wages than those in blue-collar occupations, as their jobs are regarded as being of a higher status than those of blue collar workers, whereas in France, Margolis finds that workers who have been laid off have smaller unemployment periods and higher re-employment earnings in comparison with other unemployed people. The amount of compensation will usually depend on what level the employee holds in the company.Packages may also vary if the employee is laid off, or voluntarily quits in the face of a layoff. The method of separation may have an effect on a former employee's ability to collect whatever form of unemployment compensation might be available in their jurisdiction. In many U.S. states, workers who are laid off can file an unemployment claim and receive compensation. Depending on local or state laws, workers who leave voluntarily are generally ineligible to collect unemployment benefits, as are those who are fired for gross misconduct. Also, lay-offs due to a firm's moving production overseas may entitle one to increased re-training benefits. Some companies in the United States utilize Supplemental Unemployment Benefits. Since they were first introduced by organized labor and the Department of Labor in the early 1950s, and first issued in a Revenue Ruling by the IRS in 1956, SUB-Pay Plans have enabled employers to supplement the receipt of state unemployment insurance benefits for employees that experience an involuntary layoff. By establishing severance payments as SUB-Pay benefits, the payments are not considered wages for FICA, FUTA, and SUI tax purposes, and employee FICA tax. To qualify for SUB-Pay benefits, the participant must be eligible for state unemployment insurance benefits and the separation benefit must be paid on a periodic basis. There have also been increasing concerns about the organizational effectiveness of the post-downsized 'anorexic organization'. The benefits, which organizations claim to be seeking from downsizing, center on savings in labor costs, speedier decision making, better communication, reduced product development time, enhanced involvement of employees and greater responsiveness to customers. However, some writers draw attention to the 'obsessive' pursuit of downsizing to the point of self-starvation marked by excessive cost cutting, organ failure and an extreme pathological fear of becoming inefficient. Hence 'trimming' and 'tightening belts' are the order of the day.
Effects
Traditionally, layoffs directly affect the employee. However, the employee terminated is not alone in this. Layoffs affect the workplace environment and the economy as well as the employee. Layoffs have a widespread effect and the three main components of layoff effects are in the workplace, to the employee, and effects to the economy.One framework to examine the effects on the macro level is PSB, which examines the stakeholders perspective in global downsizing. This framework examines the global perspective of positive and negative stakeholders behavior during downsizing.
Effects of layoffs in the workplace: Layoffs have remained the greatest way for a company to cut costs. Although from the employer's perspective a layoff is beneficial for the business, layoffs create an uncertainty in the workplace environment and lowers other employees' job security as well as creates an apprehension and fear of termination for the remaining employees, and subsequently lowers overall motivation in the workplace environment. According to Healing the Wounds: Overcoming the trauma of Layoffs and Revitalizing Downsized Organizations, in the post-layoff environment, there is a need for empathy, tangibility, self-knowledge, and relentlessly seeking customers among the surviving employees. The remaining employees may have feelings of survivors guilt. In order to diminish negative effects of layoffs, Wayne Cascio suggests alternative approaches to layoff and downsizing as "Responsible restructuring" approach. Optimism is critical for rebuilding the workplace environment because employees look to their leaders for stability and predictability. No matter the position in an organization, employees will look for job security.
Effects of layoffs to the employee: Employees can be affected in a couple of different ways. When an employee is laid off, his or her general trust in long-term work may decrease, reducing expectations upon rehire. After an employee withstands a layoff, the effects can trickle into future employment and attitudes. Layoffs in the workplace often leave the former employee less inclined to trust future employers which can lead to behavioral conflicts among co-workers and management. Despite new employers not being responsible for a prior circumstances, job performance may still be affected by prior layoffs. Many companies work to make layoffs as minimally burdensome to the employee. At times employers may layoff multiple people at once to soften the impact.
- Denial stage is the first stage in the emotional reaction to change or layoffs, in which an employee denies that an organization change or layoff will occur.
- Anger stage is the second stage of the emotional reaction to downsizing, in which an employee becomes angry at the organization.
- Fear stage is the third emotional stage following an announcement of layoff, in which employees worry about how they will survive financially.
- Acceptance stage is the fourth and final stage of the emotional reaction to downsizing, in which employees accept that layoffs will occur and are ready to take steps to secure their future.