When a company dismisses the employee either permanently or temporarily for several reasons, then it is called layoff. In the past, the term layoff was understood for the temporary dismissal of the employees but nowadays it also includes the permanent dismissal. There can be several reasons for temporary dismissal of the employees like economic conditions, economic cycle, production shifts and several other reasons. The employees who are temporarily laid off can join the organization back when the situation improves, or their behavior improves as per the organization requirement. Seasonality nature of the work can also cause the temporary layoff. On contrary to this, when an employee does not perform to par or committed behavior that is against the organization’s policy, then they are permanently laid off without any room for revoking such dismissal.
Regardless of the nature of the layoff, manager faces very tough time in deciding whether or not to lay off the employee because this might create mental tension to other employees as well. So, laying-off is a very complex task. The manager must carefully analyze both the aspects i.e. positive and negative, of laying off the employee. The cost of laying-off and benefit that the company can get from laying-off, the poor performing employee, must be carefully analyzed while giving high care to the emotions and motivations of other employees. It is very important to make the employees clear about the reasons of layoff because if they feel like they are laid-off without any proper reason, then it might invite hostile nature between the management and the employees as well as the management has to face legal actions (Stewart & Brown, 2012).
Coping with negative emotions accompanying an employee layoff
The layoff is not a tough task to the manager. It is equally painful to the employee being laid-off and the threat to the other employees working in the organization. The frequent layoff will tear the bond of trust between the management and the employees that will eventually mark its effect on the performance of the employees because everyone will be in the fear of getting dismissed anytime for any reason. Employees feel less secure with their job, so they start resigning from the job, or their performance erodes. So the management must take this issue seriously and be prepared with the ways to address the issues that might come with employee layoff. However, such situation can be avoided by following certain ways while taking the layoff decision, which is discussed as follows:
Enhanced Communication: Communication between the management and the employees is very important to avoid the negative consequences of layoff. When the underperforming employee is informed about the performance, or who is not synchronized with the organizational policies must be informed first instead of laying off directly. Such communication can be helpful for the employees to improve or synchronize themselves with the organizational expectation. The layoff plan of the company must be clearly communicated at all levels of the organization so that the unnecessary rumors and tensions among the employees can be avoided.
Commiserate: Before taking any layoff decision, the manager must try to understand the employee by putting himself in the shoes of the employee. There might be some covert reason for the low performance or the undesired behavior of the employee. The manager needs to understand such reasons and try to solve them. By directly laying off an employee without solving the problems of the employee might lead to the loss of the talented and skilled employee. This will be the costly decision to the company. In addition to this, the manager must understand the mental and economical impact on the life of the dismissed employee.
Frequent Meetings and Sittings: Even when it becomes extremely important for the company to lay off one or few employees, the company must conduct frequent meetings and sitting with other employees to make them clear about the organizational policies. Such types of the meeting will provide the opportunity for the management to justify the layoff and convince the employees. It will be equally fruitful in assuring the employees that the layoff was done for a reason, and no one will be laid-off without a reason. Such sessions will provide opportunities to the employees to put their feelings and perceptions about their job and layoff policy, which will be very important feedback for the company to amend its layoff policy so that the problems associated with layoff can be avoided in future (McIntyre, 2010).
Dismissal Meeting Conducting Process
Step 1: First of all; the manager must not be biased towards any employees. The manager must be calm and treat all the employees with respect and kindness regardless of how aggressive an employee becomes. The manager must avoid arguing with the employee.
Step 2: Layoff hint must be provided to the employee with clear layoff policy so that employee becomes prepared for the layoff mentally. Before laying off the employee, prior notice disclosing the reasons for being laid-off must be provided to the employee. This provided enough time to the employee to seek other job and hand over the desk to the replacing employee.
Step 3: All the formalities of laying off must be met so that there will not be any legal complications. If a single employee is laid-off, then he must be informed on the private while if the mass layoff is going to happen, then a company can conduct the counseling session. The reason for layoff must be discussed with the employee, and this must be clear, transparent, logical and scientific. If it is unclear and vague, then their roots of doubts and distrust can spread throughout the company affecting the whole organization. If there are any benefits that the employee is entitled to gain from the company because of the layoff program, then it must be fairly disclosed to the employee so that the degree of trauma caused by layoff will be reduced. The management can provide advice to the employees regarding the new job, and the reference from the company’s side should be provided while termination letter is the must.
Step 4: The terminated employee, then needs to separate the personal belongings and the office belongings. The manager or the designated person will take the custody of office belongings along with the files and other necessary information while an employee takes away his personal belongings.
Step 5: After completing all the formalities of handing over, the company needs to clear all the paychecks and provide all the benefits to the employees that they are entitled to get. The dues of both employees and employers, if any, must be cleared. If an employee(s) is laid-off due to some organizational issue, then the employee can be paid some extra penny. A farewell party can be organized where goodbye gifts can be provided to separating employee(s). All the meeting minutes regarding termination, copy of termination acceptance and all other important supporting documents and decisions must be documented for future reference (Brown, 2013).
Compensation to the separated employee
It is equally important to compensate the employees who are laid-off by the organization ; however, the employees who are laid-off for any form of misconduct or who leave the organization voluntarily will not be entitled to receive any compensations. If employees are laid because of organizational problems, then they can get the compensation from the organization. But, the compensation provision is also dependent on the labor laws of the country. According to the law, the compensation plan might differ from country to country; however, one of the plans can be designed as:
The compensation plan is designed based on the number of years of employment. It is a complete decision of a laid-off employee whether to get the compensation on the periodic basis or on the lump-sum basis. The employee will get the number of payments that commensurate to the number of the years of the employment. However, temporary staffs and employees under the probation period will not be eligible to get the compensation. For example, if the employee with 5 years of service is laid-off, he will be entitled to get five installments of compensation, each compensation installment being equal to the gross salary that he earned in the last month before termination.
Following is the compensation disbursement plan:
If the employee desires to receive the entire amount in a lump sum, then 5% of the total amount will be deducted.
Ways in which the layoff may affect the company
Enhanced productivity- When the employee who is affecting the productive environment of the company or who is affecting the performance of the other employees is laid off, then it is very likely to increase the productivity. When the company falls into an economic problem, then laying off the unnecessary temporary employees can be a good way of saving cost. Overstaffing can decrease productivity, which can be managed by laying off the unnecessary staffs.
Chance of demotivation- When there is a frequent layoff, then it will produce some fear of job insecurity among the employees. The one thing that will always be there on the mind of employees is the fear of being laid-off. So, this kind of fear will decrease the motivation and they start seeking jobs in the other companies with high job security.
Learning- When an employee is laid off for poor performance or for any misconduct, then other employees can learn from the consequence of such behaviors. They will know that if they violate the conduct of the organization or do not perform as per the expectation, then there is the high chance of being laid off.
Conclusion
Layoff policy is very important for the organization, as this will help the organization to balance its workforce as well as the performance of the employees. It can be the effective tool to punish employees. On the other side, a layoff can have several negative consequences. When an employee(s) is laid off, then the employee unions or the group of terminated employee might initiate rage against the management causing damage to the organization. So, laying off is like a double edged sword that needs to be handled carefully. If it is handled carefully, it will have positive results while if it is mishandled, it can have the disastrous result. Laying off must be done carefully, and manager must not use this based on personal biases.
References
Brown, J. (2013), 9 Steps for Conducting an Employee Termination Meeting, retrieved on February 17, 2014, from: http://www.peopletactics.com/9-steps-for-conducting-an-employee-termination-meeting/
Contract Standards, Compensation upon termination, retrieved on February 17, 2014, from: http://www.contractstandards.com/document-checklists/executive-employment-agreement/termination/termination-benefits
McIntyre, S. (2010), Managing the Negative Effects of Human Resource Downsizing, retrieved on February 17, 2014, from: https://suite101.com/a/managing-the-negative-effects-of-human-resource-downsizing-a242925
Stewart, G. L., & Brown, K. G. (2012). Human resource management (2nd ed.). Danvers, MA: John Wiley & Sons, Inc. Please include more than 3 references.
