Employee layoff is one of the tedious tasks that managers may face during their tenure. Not only it impacts a particular employee but also the organization as a whole. Leaving aside the cost-cutting that is often the primary reason behind dismissal, it spurs negative emotions thereby affecting flow of work in the company. Researchers have opined that an effective communication with employees can assuage the downbeat to an extent.
This paper aims to highlight the impacts of an employee's termination on the organization. Also, it recommends some ways to handle the layoff in the most-effective manner. The paper presents a case of BetterMinds(Fictitious) that lays off its ten-year-old employee, Mr.John for the primary reasons of reduced business and cost-cutting. It will help readers gain a didactic insight regarding the topic.
Company Profile and Scenario
BetterMinds, a growing IT and ITes organization, has planned to layoff one of the senior employees, Mr. Thomas, because of decreased business after recession in US industry. Mr. Thomas has been working in Quality Assurance Department as a regular employee since ten years as Senior Technical Analyst. His weekly compensation is 800 $, exclusive of medical insurance and other perks. His layoff, dated 10 Oct 2014, has raised suspicions among employees regarding a possible reduction in the future.
Coping With Negative Emotions of an Employee Layoff
Layoff is an emotional affair especially for those who remain with the organization. An employee who is laid needs help to get through the transition, those who survive need to be known about the strategic goals behind the decision, and an assurance for their future. Employees may become skeptic about the future direction of the organization; managers need to assure them that the decision was not arbitrary, rather backed by sound internal and external conditions.
As such, it is imperative to be open and interactive with employees as much as possible. Managers can plan and inform employees about possible layoffs; it is also necessary to keep employees involved by discussing the current position of the organization with them. Sharing competitive information and share market data may convince the staff about unpleasing conditions that the organization must be facing. After the layoff notification, managers must keep conversing with separating employees and with the remaining staff as well. Succinctly, a healthy interaction is the key to successful layoffs. It is crucial to deliver the message confidentially, privately, and respectfully to laid off employees.
Secondly, the manager can arrange a career transition firm to impart the outplacement support to the separating employee. Outplace service will consist of advising and career counseling; the business will help the employee in developing cover letters and resume. Additionally, professionals can try to bridge the demand-supply gap in the market by suggesting suitable employment options to the employee. It will bring the impression that the organization treats its employees as people, not as line items on a budget. Research studies have identified that outplacement support enhances employee's morale and sends a positive message to the surviving staff with respect to their job security. It fosters cooperation, trust, and collaboration; these are pre-requisite to coping negative emotions.
Last but not least, it is crucial for managers to remain calm, and positive to handle negative employees' sentiments. The manager should be accessible to separating employees, and survivors. Studies have identified positive relation between employees' morale and management's accessibility at the times of change. During layoffs, employees may go through different stages of denial, resistance, exploration, and commitment. Managers need to understand the metal stage of the separating employee and impart support accordingly. For instance, if an employee gets stuck between stages of denial and resistance, the manager should provide furtive mental support and counseling. By contrast, if the employee has overcome anxiety and willing to explore options for future, it is imperative for the manager to emphasize outplacement support.
Succinctly put, layoff is a psychological event that not only affects the separating employee, but the survivors also. Thus, managers need to work on an individual level as well as organizational level. It is important to understand the feelings of the staff and persuade them accordingly.
Steps to Conduct Dismissal Meeting
1. Contacting with ER (Employee Relations): The manager should initiate the process by getting the approval from ER; it reviews the proposal to finalize the package.
2. Preparing for the notification: The manager must plan the meeting 30( preferable 60) days in advance of the layoff date. It is also important to create a development plan so that separating employee can transfer the knowledge and skills as required. Relevant documents/things for information meeting include the letter of notification, contact numbers of HR department, contact details of transition service( if the manager avails), and a copy of layoff for the employee.
3. Preparing for the human aspect of layoff: The manager should select a place( inside or outside) the organization where the meeting can be held privately. He can present reorganization, budgetary reduction and other relevant statistics to put a convincing impact on the employee. He/she needs to be sensitive and clear in stating that the decision is final and backed by strong reasons.
4. Scheduling the meeting on the decided date
5. Conducting the meeting: The manager must understand the mental stage of the employee and offer the support accordingly. He/she must discuss the transition plan with respect to knowledge transfer. Also, the manager must assure that all projects are completed before deadlines.
6. Supporting the Survivors: The manager( if feels necessary) can communicate the decision to rest of employees and impart them the required support to mitigate negative sentiments.
Determining The Compensation( The Case of BetterMinds)
The firing of Mr. Thomas has been under WARN( Worker Adjustment & Retraining Notification), that requires the management to give 60 days notice to the employee or pay 60 days' benefits and salaries.
It is imperative for BetterMinds to work on a negotiable severance package so as to maintain a public goodwill and trust of surviving staff. There are various ways the management can choose severance package of separating employee. For instance, many US based companies assume that they will give one week's pay for each year of service. If an employee's weekly salary is $500 and he has continued for five years, the severance payment will total down to $2500.
In United States, dismissed employees are entitled to unemployment benefits. Additionally, some employers need to continue health insurance of the employee as per US Federal law. Some organizations opt for providing COBRA( Consolidated Omnibus Budget Reconciliation Act) benefits to the separated employee till he gets a new job.
The manager of the company(BetterMinds) must adhere to country-specific laws and regulations( if any) and provide the support to the dismissed employee accordingly. As such, the severance package of Mr. Thomas may include following things:
1. Salary benefits based on tenure( $800*10= $8000)
2. Continuation of medical coverage for 18 months under COBRA act
3. Due vacation and leaves payouts
4. Outplacement Support till for six months
5. Mr. Thomas has lost the job because of organization's external conditions, and not because of any personal faults. As such, the manager agreed to provide unemployment compensation. However, the amount will be determined by state law. Usually, these benefits continue for 26 weeks.
Timeline of the Disbursement of the Compensation
Note: Prepared by the author, Sources: (Mansfield, Bowers, Brown, Forshaw, & Kom, 2011),,
Three ways in which the Employee's Layoff Affects the Organization
First and the foremost, the redundancy may affect survivor's productivity, morale, loyalty, and performance. Tang and Fuller(1984) identified that layoffs may affect job satisfaction and overall performance of the staff. Additionally, it may spur feelings of frustration and anger thereby affecting the trust level of staff members towards the organization. These impacts may sum up to reduced energy, productivity, and performance on the part of employees.
Scholars have opined that employees tend to nurture relations with each other over time. As such, those who are close to the laid-off employee are the most affected ones. As Mr. John was serving the company since ten years, it will come as a shock to the sales department along with a feeling that, "the company does not even value its key employees." It may erode the trust level of the employees towards the company. These impacts may further malign the company's public image. However, this may not be the case with BetterMinds( Fictitious Name) as it has not conducted layoffs at mass level, and designed a planned corporate strategy for the severance package of Mr.John.
However, it may instill mental fear among staff members that the organization may resort to further reduction in the future. As a result, the organization may face increased turnover, especially in Sales department that Mr.John headed. The layoff may also create the impression that the organization will target employees at a higher designation and excellent pay packages to cut down the cost of operations. It may, thus, pose a challenge before the manager to retain colleagues of Mr.John working on similar designations and pay packages in other departments as well.
Last but not least, the company, in the future, may end up in incurring more cost as a result of a layoff. The manager has worked out the option of outplacement service and severance package for the separating employee. If it gets coupled with increased turnover and lack of performance, BetterMinds may have destructive impacts of this layoff. Matthews (2002) suggested that layoffs may cost more than they save. In addition to separation packages and support, it may take a great time of the management in redistribution of workload, knowledge transfer, and conducting related formalities.
The paper has discussed impacts of layoff by providing a scenario of BetterMinds( Fictitious). Conducting the layoff may be one of the most difficult tasks for the management as the event is related to emotions and psychology. As such, the author reiterates the importance of financial and mental support on the part of the manager to the laid-off employee. Managers must think of imparting outplacement support the employee the assuage the feeling of distrust and negativity.
Research testifies that layoffs may prove futile for the companies because of the associated costs, lengthy procedures, and company's public image. BetterMinds is also a mid-size organization; providing severance compensation and associated benefits may not be easy for the firm. Also, the layoff may create the risk of employees' turnover in the future.
Thus, managers need to act in diligence while deciding for individual or mass dismissals. It is imperative to consider possible issues that may crop up in the future along with present day industry conditions.
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