How to Fairly and Compassionately Conduct Mass Layoffs
Mass layoffs are challenging for any company, but it’s crucial to develop a plan when changing circumstances require a workforce reduction.
If you’re going to be firing a large number of employees due to difficult business times, you should take an organized approach. Here is a basic outline for a sound layoff protocol that you may adapt to your needs.
Get Senior Employees on Board
Meet with any senior managers to ensure that they are fully aware of your ideas and thoroughly understand (or, even better, agree with them). If you have a bookkeeper or human resources employee who will handle the required documentation, mention them. All of these individuals have to commit to full confidentiality.
Pick a Day for the Layoffs
Choose a day where all senior managers will be in the office to break the news to the laid-off employees. Contrary to advice you may read elsewhere, we don’t believe that there is a magic best day. Pick a day when the maximum number of people you’ll be letting go will be in the office. Choose a time that lets you give departing employees a couple of hours to leave the building, and still leaves you time to gather remaining staff for a company meeting to help restore morale.
Consider the notice requirements if you’re laying off a large number of employees. If you just have a few workers, you are not required to give them any notice prior to terminating. However, in some places, including New York, 90 days’ notice may be required when there are 25 or more layoffs. Additionally, firms employing 100 or more employees are required by federal law to give 60 days’ notice in specific circumstances in any state. To find out if your state mandates a specific amount of notice, contact the labor or employment development department in your state.
Prepare Final Paychecks, Recommendations, and Severance
Payroll for the final day should be prepared by your bookkeeper, and it should also include any accrued vacation time. In certain areas, you must give employees their last paychecks on the day they leave their jobs; in others, it must be done the following payday or within 72 hours. It makes reasonable to pay employees on their last day so that you can be confident you are in compliance with state law. Additionally, several jurisdictions mandate that accrued but unused vacation days be paid out on the final day; this is more effective than waiting until the end. In almost all states, there are fines for failing to pay wages on time. Almost all states have penalties for not paying wages when due—with some charging $1,000 per employee, per pay period, and others exacting a penalty of 30 days’ wages per employee not paid on time.
Create a cordial letter of recommendation including the person’s employment dates, duties, and a general statement of approval for each departing employee as well. Your staff will value your politeness, and it could make everyone’s day go more smoothly. Even if you are dismissing a worker for falling well short of expectations, leave out all negative information and merely list the employee’s employment dates and responsibilities in their letter.
Prepare a separate check to be presented to the employee in exchange for their agreement not to sue you for the termination if you choose to offer severance money. An suitable release must be prepared and signed by the departing employee. State legal requirements in this area vary substantially, so you should speak with an employment attorney about the release, especially if you suspect an employee might sue.
Pay Modest Severance If You Can
A commitment to pay severance to employees who have been laid off is not a legal requirement (in your employee handbook or an employee contract, for example). However, if you can afford to do so without seriously jeopardizing your company’s ability to continue operating, you should do so for a number of reasons.
- Departing employees will feel more respected and be far less likely to bad-mouth you to others.
- Continuing employees will see that even when your business is in the dumps, you are going the extra mile to be fair. As a result, they are more likely to put their shoulders to the wheel.
- When times eventually improve, you may want to rehire some of the people you have laid off, which will be far easier to do if they see you as a fair employer.
- You’ll feel better about yourself.
You decide how much severance to pay. Obviously, you can’t afford to take a significant financial blow. Small firms typically cannot afford to pay more than one week of compensation for every year worked due to their significant financial hardship. But be sure to be consistent in how you pay severance, using an impartial formula to determine it, to prevent allegations of discrimination.
Break the News All at Once
If you have sufficient managers, have them meet with each outgoing employee on the scheduled day. The managers should then accompany the departing employees to a private meeting room or, if required, your office. If you worry that a worker might start acting violently, make arrangements for the right assistance to be available as quietly as possible.
Briefly describe the economic requirement for the layoff at the beginning of the conference. Keep it quick because individuals will probably be overwhelmed and unable to take in a lot of information. For instance, it suffices to state that your company has lost a $200,000 contract and that the bank has threatened to revoke your line of credit if you don’t immediately reduce spending. Don’t forget to congratulate the departing workers for their dedication and, if it feels right, to apologize for having to let such devoted workers go due to financial constraints. Tell them that their compensation for today plus any accrued vacation will be in the envelope in front of them. At this stage, if you have a human resources manager, or failing that, an office manager, you may feel that it’s less embarrassing to all to step out of the room, leaving the details of collecting keys, signing releases, and answering practical questions, such as eligibility for health coverage under COBRA, to someone else.
Send a brief email (or other notice) to all current employees informing them of the situation and inviting them to a company meeting later that day while the departing employees are still in the conference room. Simply state in your email that you have had to trim staff and overhead due to the challenging economic conditions. The letter should express gratitude for everyone on the layoff list for their commitment and hard work. Leave the more detailed explanation for the business meeting; that is all.
Secure Your Computer System Before Employees Pack Up
Have whoever manages your computer system turn off any laid-off employee whose computer has sufficient knowledge to destroy or steal data or crash your network while laid-off workers are present in the meeting space. You can have someone sit with a leaving employee so they can remove private files from their computer while packing up.
Employees who are leaving the company should be allowed about an hour to pack up and leave the premises. It’s considerate to have boxes available and to let coworkers assist with packing. However, everyone should have left in a few hours. Make sure all computer access passwords and codes have been disabled, if you haven’t already.
Hold a Company Meeting
Call a corporate meeting the same day, if at all feasible, and outline what transpired and why. People will respect you more if you are open and honest. Although a few slides outlining your company’s financial position might be helpful, this is not the time for a whole PowerPoint on financial data.
If you are an employee that has just been laid off, see our article for steps on what to do next!