How to Lay Off Employees With Compassion: A Comprehensive Reduction Guide for HR

By Kate Grimaldi, Senior Director, Enterprise Talent Strategy

News about layoffs impacts everyone, including — and maybe especially — HR practitioners.

Nearly 80% of American workers are concerned about job security amid talk of a looming recession. Even if your company is not facing a workforce reduction, you are likely getting anxious questions about the future.

As HR practitioners, our first thoughts go to those who have lost their jobs. No matter how delicately a layoff is handled, suddenly finding yourself unemployed is a huge blow. Often at the same time, we’re focused on helping the remaining employees cope with loss and fear.

But it’s important to remember that a layoff takes an emotional toll on all of us, and HR professionals are humans, too. From workforce analysis and planning to having those difficult conversations to recovery and rebuilding, HR is at the intersection of it all.

Being prepared for every step in the process not only helps others, but also helps HR practitioners balance their professional responsibilities and their inevitably personal feelings.

What Is a Layoff?

Although sometimes used interchangeably, there are three types of employment separation that a business might conduct to cut costs.

• Furlough — a required but temporary leave of absence, which might be a certain number of unpaid hours or days. By offering furloughs, employers may be able to avoid terminating employees.

• Layoff — this usually occurs due to a lack of work, but there is intent or potential for rehire. The employee holds no blame, and typically, they are eligible for unemployment insurance benefits.

• Reduction in Force (RIF) — when a position is eliminated to reduce headcount. A layoff becomes an RIF when the company makes a permanent decision not to rehire employees.

The action your company takes determines how you will have to comply with layoff notice requirements in the federal Worker Adjustment and Retraining Notification (WARN) Act, state termination pay, and when responding to unemployment claims.

What Is HR’s Role During a Layoff?

That question is a little misleading, because HR has many roles and responsibilities throughout the layoff process. However, HR can’t operate in a vacuum. Working closely with finance, legal, and business leadership, HR facilitates strategic workforce planning to get the company back on track while ensuring that every step of the process is fair and human-centric.

Step 1: Defining business outcomes and options

The first thing we usually think about as an HR practitioner is: What are we trying to accomplish? What outcome do we need to achieve? Are we just trying to cut costs? Or do we need to reduce headcount? Those are two different things.

If the company’s goal is to save money, HR’s next question is: What can we do other than lay off employees? Options might include instituting a hiring freeze, eliminating business travel, or putting a hold on bonuses. If one area of your business is lagging behind, can you cross-train employees to work in more profitable areas?

After exploring options, the company may ultimately determine that a layoff is necessary. Is it a temporary or permanent adjustment? Would a furlough give the company time to recover financial stability? As the HR expert, you steer these conversations about layoffs and inform leadership of potential alternatives.

Step 2: Staying compliant with layoff notice requirements

The WARN Act generally ensures that workers at companies with 100 or more full-time employees receive at least 60 days’ advance notification of a plant closing or mass layoff as defined in the legislation. As with most employment laws, there are many qualifications and requirements, and non-compliance comes with significant fines.

As the employer, you must provide the notice in writing. Typically, this includes the notification itself, whether the layoff is expected to be temporary or permanent, and any severance benefits the company will provide. You are also required to notify the state dislocated worker unit, the chief elected official of the local government, and any collective bargaining unit or union.

Several states and even some cities have their own legislation, sometimes referred to as “mini-WARN laws.” Often these are intended to protect workers at companies with fewer than 100 employees, while some extend the federal notification period beyond 60 days. Be sure to take all of these regulations into consideration when planning an employment separation.

Step 3: Selecting employees for layoff equitably

No one, much less an HR professional, can maintain total emotional distance when making decisions that will impact many lives — not only the people you work with every day but their families and even their communities.

While not a cure-all, data will help everyone maintain a level of objectivity when selecting employees for a layoff. With data insights and analytics, HR practitioners advise leadership to determine the organizational design needed to achieve business outcomes. Typically, this is done by measuring impact, which is usually a combination of performance, tenure, role, and responsibilities.

Who makes the biggest impact may be who generates the most revenue. But impact is more likely a measure of multiple factors such as productivity, efficiency, behavior, and quality of work. Depending on the role, how you weigh those factors could be different for each employee. For one company, it may be critical to keep the production line operating, while another may need the industry expertise of a highly paid manager to remain competitive.

Be sure to consider the infrastructure needed to support the newly organized workforce. For example, if a manager with four direct reports is laid off, who will those employees report to in the future? Are there positions or functions that are necessary to run the business, like IT or maintenance?

If the company selects multiple employees to lay off, HR practitioners should also use data to ensure no group or protected class, such as members of a certain race, gender, or age, is represented disproportionately.

Step 4: Having the layoff conversation

There is no easy way to tell someone they are being laid off. But there are some things an HR practitioner can do to prepare for and handle the layoff conversation.

First, find your focused mental headspace. People usually aren’t expecting to be laid off, and you can’t predict how an individual is going to react. They will ask you why they were chosen over someone else and how will they pay their electric bill or child support. Some will be angry. Some will burst into tears.

Prepare yourself by practicing your talk tracks. Lead with empathy. Explain what resources the company is providing to help the employee transition. Remind them that this is a company decision, not a personal one.

Have all the details buttoned up. If you’re offering a severance package, give a deadline and encourage them to use that time to review it carefully. Be ready to answer questions about health insurance benefits, 401(k), vacation time, and filing unemployment. However, don’t overload them with information. Provide the high-level details and your contact information so they can ask questions after they’ve had time to process.

If the company is laying off multiple employees, don’t schedule meetings back-to-back. Make sure to leave time in between to pull yourself together. Accept that employees will be upset, but also know that you are entitled to protect your own mental well-being.

Learn More: Guide to Employee Offboarding: How to Gracefully Handle Employee Separation

Step 5: Telling the remaining employees

A layoff can feel like a betrayal — for both the employee who leaves and the employees who stay. After a layoff announcement, those who remain will experience a range of emotions, including grief, guilt, and fear about what lies ahead.

When you tell the rest of the company that someone has been laid off, be honest, authentic, and transparent. “We’ve had to let go of some people and it will be very difficult for them, for their families, and also for us. We’ve lost friends and colleagues. But this is how we will keep the business going. These decisions were made to drive the company forward.”

Although you don’t need to offer details, remaining employees will appreciate hearing how the company is trying to help individuals transition, including whether they received severance packages or extended benefits. If appropriate, let employees know that there are plans to rehire and/or that there are no plans to lay off others. Again, start with honesty and lead with empathy.

What Happens After a Layoff?

Nobody is immune to change, and HR people know that better than anyone. Research has shown that job insecurity increases the risk of mental health issues, such as depression, anxiety, and financial stress. Additional studies have found that job performance declines by as much as 20% after a layoff, especially if employees don’t believe the process was handled equitably.

Retaining the people you have is critical to rebuilding culture. There are often lessons learned from a layoff that can help inform your HR strategies moving forward:

• Look at key moments in the employee experience — are there areas for improvement like recruiting or skills training that will help attract, retain, and develop the workforce your business needs to be successful in the future?
  

• Use performance management data, employee survey tools, journals, and AI-driven reporting tools like Paylocity’s Modern Workforce Index to assess manager effectiveness, employee sentiment, and engagement.

Most of us work in Human Resources because we want people to succeed. There’s no question that going through a layoff, whether it’s one person or many, is difficult for everyone involved. But it is also a time when we, as HR practitioners, can be the most impactful — helping every employee adjust to change.