Layoff

Layoff meaning is temporary or permanent terminations of employment because of financial or operational reasons in organizations. When companies are in a difficult situation of staying afloat, and they decide that reducing the number of employees is the sole solution to minimize costs, they may prefer to conduct a layoff.

Although organizations might consider this a last resort under these challenging circumstances, it does not change the victimization of employees. Therefore, employees who lose their jobs as a result of conducting layoffs may be entitled to unemployment benefits, severance pay, and outplacement services.

What Are the Reasons for Layoffs?

Many people have heard of the concept of layoffs, and as many employees have lost their jobs for this reason, the question "Why do companies do layoffs?” is searched more. Even though it is a challenging situation, there are some reasons for layoffs, as follows:

1) Economic Problems

When companies face difficult economic times, they tend to cut costs to recover from financial hardship. For this reason, layoffs can be implemented to reduce expenses.

2) Competitive Market

It is a harsh reality that organizations can prefer to lay off employees to remain competitive. In today's business environment, this may occur when these organizations are attempting to cut costs or making an effort to concentrate on their core services.

3) Technological Advancements

Although technological developments are impacting many people’s lives positively, they can sometimes cause employees to be laid off. This is due to the ability of current technologies to automate jobs that were formerly performed by human labor. Consequently, the likelihood of organizations laying off employees they no longer need has undeniably increased.

4) Reorganization Efforts

Businesses occasionally reorganize, which results in layoffs. This may occur while organizations are restructuring their operations or merging with an acquired company.

What Are the Types of Layoffs?

There are many types of layoffs employees may encounter on their career paths. Here are some layoff types:

• Temporary Layoffs: In the case of business or economic reasons, organizations may suspend the jobs of some employees temporarily. However, these employees can be rehired, when things get better.
• Permanent Layoffs: This type of layoff includes the organizations permanently laying off their employees. In permanent layoffs, which can occur due to reasons such as a business or department closure, restructuring, or reduction, the employees are not expected to be called back to work.
• Voluntary Layoffs: It involves situations where organizations give employees the choice of voluntarily agreeing to a layoff in return for a severance package.
• Involuntary Layoffs: In these layoffs, there are laid off employees without the agreement of them. This is usually due to reasons such as low performance and non-compliance with business policies.

How Do Layoffs Negatively Impact a Company?

In today’s competitive business world, it is common for employees to be laid off by the organization they work for. Employee layoffs can be seen as advantageous for companies because they can help to achieve some goals, such as reducing costs, in the short term. Nevertheless, there are various disadvantages of layoffs in the long run. Here are some significant negative effects of layoffs:

Decline of Company Culture

Like laid-off staff, remaining employees can also be negatively affected by layoffs. Employees may start to worry about their own job security when they witness their coworkers losing their employment, which can decrease their motivation and productivity. It also may lead employees to feel that their organizations do not care about employee engagement, which easily causes a decrease in trust.

Decreased Creativity and Innovation

Since skilled laid-off employees cannot be easily replaced, losing these talents can delay or prevent these companies from achieving successful new projects. Besides, these layoffs might cause the remaining staff to avoid presenting new ideas in order not to lose their jobs. Both of these situations will block creative and innovative ideas that could benefit the company.

Damaged Employer Branding

It is inevitable that organizations lay off their employees, and the burden for the remaining employees usually grows. In these situations, because remaining staff generally have to do the work of laid-off colleagues, they are likely to have burnout after a time.

This situation causes not only a decline in employee productivity but also harms employer branding. This is because overworked employees can justifiably share their challenging workplace experiences with others through different channels, such as social media. It is also possible for former employees who feel they were unfairly laid off to do so.

Conclusion

In this content, firstly, you have learned the layoff definition, and then its reasons, types, and negative impacts on a company. In other words, you gained a wide perspective on what layoff is, as an employer, HR professional, or only someone interested in HR subjects.

Even though layoff is a harsh reality and its details should be known well, there are various HR topics to discover in your career journey. If you are willing to improve your organization and yourself gradually with a lot of engaging HR content, visit Hirex!