HR Headaches Series: How to Talk to Employees About Layoffs or Furloughs

In this week’s HR Headaches post, we discuss how to explain the need for layoffs or furloughs to your staff — and make the difficult transition easier.

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When it comes to announcing layoffs or furloughs, it’s crucial to prepare and have a plan

Businesses, at some point or another, can face the need to reduce staffing levels with layoffs and furloughs. It’s not something you hope will ever be required, but owners and managers should have the ability to discuss these situations candidly without causing a panic among staff.

The past year has illustrated the importance of being prepared for the unexpected. While layoffs and furloughs are often the result of sudden events, some have a longer lead time. The loss of a large client or account could mean reduced production and staffing; economic downturns may be slow but steady, requiring a shift in staffing levels. Whether the layoffs are needed quickly or anticipated, being prepared to discuss their need with staff can help ease the difficult transition for everyone.

Start with a plan 

Whether the layoff is looming in the near future, or you’re prepping for what may come down the road, it’s important to have a plan. Before you address employees, be prepared with:

  • What needs to be communicated
  • What you shouldn’t say
  • Documentation that is required, and
  • How you’ll respond to questions

Some situations call for targeted groups or individuals to be relieved of their duties; others call for a company-wide slowdown. Layoffs and furloughs are never good news: you’re not going to be able to put a good spin on them. The goal is to translate the information necessary so employees are informed about what is happening and what may happen in the future. They’ll then be able to take that information and plan their own future accordingly.

Layoffs and furloughs are never good news: you’re not going to be able to put a good spin on them. The goal is to translate the information necessary so employees are informed about what is happening and what may happen in the future.

Act quickly

Staff members may already be aware of economic or governmental reasons that are affecting the company, but often the rumor mill gets it wrong. If there’s a buzz going around the company, be ready to call a meeting quickly to discuss the issue and put any misinformation to rest. A panic can impact productivity and morale, and start employees looking for jobs elsewhere. You’ll want to stop that as quickly as possible. Don’t overpromise or lie: let staffers know you’re aware of the situation and formulating a plan. When it’s ready, you’ll let them know immediately.

Be specific

When you have your plan in place, outline the specific reason(s) for the reduction. Staff members are mature adults, they deserve to know the truth. While you may not be able to go into detailed information about why a contract wasn’t renewed, for example, you can provide the overall reason. Let staff members know you’ve reviewed the financials and that the course of action to maintain the long-term viability of the company will be short-term pain.

Communicate widely, then specifically

No one wants to hear the entire marketing department was laid off when they stop at the water cooler. Speculation and dissent will likely be the result. If your plan affects only certain areas, first communicate to the entire company what’s going on. Outline the need for the layoffs, letting staff members know that not every department will be impacted. Tell the group you’ll be communicating separately with staff members and managers of those departments that will be affected. Immediately after, discuss the situation with the groups who will be impacted. In that way, you’ll quash concerns of “we’ll be next.”

What to say and what to avoid

Don’t try to sugarcoat the situation, don’t start with small talk. The meeting will be uncomfortable, whether you’re talking to a group or an individual. It’s best to get to the point quickly and deliver the bad news. Some managers prepare a script in advance, to help them stay on message.

A brief outline, or some talking points such as the ones below, might be helpful:

“I’m sorry to inform you that your position will be on layoff status beginning XXX date. The decision was made after lengthy consideration of our options and does not reflect your value to the organization. We’ve looked at all the alternatives, and unfortunately, the decision is final.”

If you’re making an announcement to a group, you may want to tell them as a team, letting them know you’ll be available for questions separately, if needed. But let employees know the decision is final. Offer employees necessary paperwork that you’ve prepared in advance, as well as a timeline for them to clean out their work areas.

Have documentation ready 

Have any necessary paperwork, personalized and ready to provide to each employee. If you’re notifying an entire team, have envelopes ready with each employee’s data included. Tell staffers they can pick up the paperwork, which includes their layoff notice, Consolidated Omnibus Budget Reconciliation Act (COBRA) notifications and other paperwork included. Each packet should have:

  • Written notice of the layoff — which may be necessary to apply for unemployment compensation benefits
  • COBRA notification documents, for continuation of insurance coverage(s) if applicable
  • Notification of any available sick, vacation and/or personal time available that can be paid out due to the layoff.

Keep it legal

Don’t tell employees they were chosen for layoff based on their age or other protected status. It may seem like a logical financial plan to lay off the most highly compensated staff member from a team, but often that translates into someone in a protected age group.

Don’t let youth be your guide, either. If layoffs aren’t department or company-wide, your plan must be based on non-protected categories, like seniority. Employees covered under a collective bargaining agreement may require a specified amount of notice before layoffs can begin. Make sure to consult union contracts before making any announcements.

Don’t make promises you can’t keep

This is hard news for most staff members; your role is to be professional, frank, and as helpful as possible.
If you know the shutdown will be temporary, by all means translate that information with detailed specifics on when staff members can expect to return to work. If the layoffs are open-ended, be truthful. Employees will need to make alternate arrangements for their own financial health if necessary. Promising their jobs will return quickly is unfair to them, and to their colleagues if you don’t have a date certain.

Don’t try to spin the situation or ask employees to “look on the bright side.” This is hard news for most staff members; your role is to be professional, frank, and as helpful as possible.

Be ready to respond to questions

Employees will likely be upset and shocked when they hear the news. You’ll want to be ready to respond to their questions, but don’t offer false hope. If the layoffs are finite — there’s a targeted return-to-work date, let them know. If they are not, let staff members know you’ll do your best to return the company to previous staffing levels, but if they find other work, they should accept it.

Don’t negotiate. There’s no point letting an employee cry or rant if the decision is final. If they’re highly agitated, offer to call someone to come get them so they can process the information privately.

Furlough versus layoff

The main differences between layoff and furloughs are typically benefits and timelines. When employees are laid off, they are generally COBRA-eligible: the company will no longer be paying the employer portion of premiums. For employees who are furloughed, however, most businesses continue to pay the employer-portion of benefits. If there is an employee contribution necessary, provide the furloughed employee detailed information on how they pay their portion to continue insurance coverage.

Furloughs often tend to be time-specific. Companies generally predetermine how long the time off will last. For these, providing the date employees can expect to return to work offers clarity on whether they should apply for unemployment benefits, or start the process of looking for another job. You’ll also want to notify furloughed employees of all benefits that will be suspended during the time off — like sick, vacation, and personal time accrual.

Laying off staff members is difficult for business and employees. Notifying staff as soon as possible and providing them the information needed to make arrangements for their future is key. When it comes time to make the difficult decision, having a plan in place allows business the opportunity to implement layoffs professionally, legally, and as painlessly as possible.

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