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Laying off Employees Advantages and Disadvantages


Anyone who is at the thick of things in the business world would know that given the present economic crunch, companies cannot afford to waste money on any luxuries. Any kind of extravagant work culture is going to end up doing nothing but draining the company’s money.

No matter how well your company is doing at a given moment, you must ensure that you are investing your money properly as you can never tell when things are going to take an unexpected turn for the worse.

Here are some of the main advantages and disadvantages of laying off employees.

disadvantages laying off employees

What are Layoffs?

Layoffs are nothing but suspending or terminating their employees from the organization. This can be temporary or at times permanent depending upon the crisis. Layoffs is a practice that happens during organizational downsizing or restructuring by their employers in order to sustain their hold in the business market.

Laying off Employees Meaning:

1. Could imply a temporary suspension:

Employee layoffs could mean one in two things. Firstly, laying off employees most often implies a temporary suspension from work. In such a case the employees are temporarily suspended from service and they leave with the expectation of being called back by the company in time to come.

This sense of expectation comes as a ray of hope to the employees, silently communicating to them that chances are that they might be getting their jobs back in time to come and all is not lost. Employees are usually called back if the company is able to get back on its feet soon enough.

2. Very often also means a termination of employment:

Secondly, laying off employees is a step which companies resort to in the most extreme of circumstances, when it is likely that the company will not be able to pull things together again.

As mentioned above, laying off employees does carry some amount of expectation of being hired again, yet most often a layoff does mean a permanent termination of employment. In such a situation, employees are forced to seek employment in another company.

The decision to layoff your employees is never an easy one to take, but desperate times do call for desperate measures.

3. Prior notice may or may not be given to the employees:

The decision to layoff employees does require a considerable amount of weighing and measuring. The boss of a company does need to consider if reducing the workforce in the company is going to improve things or further worsen them.

Laying off employees is an immediate money saver, but in time to come it might end up costing the company more as the work output of the company might be considerably reduced as well. When laying off employees, prior notice may or may not be given. In such a case a boss does what he thinks is best.

4. It is due to no fault of the employees:

Layoffs are usually carried out for one of three reasons. It is usually because of lack of funds, lack of work or even a lack of material to work with. Most often, an employee has nothing to do with the decision which has been taken.

If you are someone who has been laid off, you need not feel bad about what has happened. If you are a good employee who works well, then any company would be willing to hire someone as efficient as you. At such a time, companies are willing to write good recommendations for those employees whose employment has been terminated.

Criteria for Laying off Employees:

In order to avoid getting into any kind of legal soup, companies must ensure that they are establishing in a clear way, the reason for laying off certain employees. The main criteria for laying off employees is usually one of these four.

1. Elimination of certain jobs:

One of the main criteria on the basis of which layoffs are carried out is the elimination of a certain job position altogether. At a time when certain title-specific layoffs are carried out, there is nothing that the employee can do in order to save himself.

Such a decision is carried out without even considering who the person is, what has been his contribution to the company or even how many years he has been a part of the team.

Things like this are not kept in mind and the person is laid off on the basis of the position he holds and nothing else.

2. On the basis of the seniority of an employee:

Secondly, most companies prefer to carry out layoffs on the basis of seniority. Doing things on this basis reduces the chances of any kind of complications on the legal or even on the personal front.

In such a case all those who have been hired most recently are shown the door irrespective of how positively they have contributed to the company in their tenure.

When things are done in this manner, then the company shows its sense of loyalty to those who have stuck around for many years and been there with the company at its best and even at its worst.

3. By making note of the performance of an employee:

There are some companies who believe that the best way to take the decision of who should stay and who should go is on the basis of the performance of the employees.

Those who have done their work best and made most money for the company will be retained whereas those who have not given there one hundred percent are told to leave.

Many believe that doing things this way is most fair as well as transparent, because at the end of the day credit should be given where it is due. Those who have worked the hardest should reap the benefits for their efforts.

4. Giving a Voluntary Retirement option to some employees:

Though it is completely illegal to layoff those employees who are the oldest, yet many companies take the decision to offer the older employees packages which are rather appealing to them.

At such a time, companies must ensure that they are taking their steps with great caution such that the employees do not take any kind of legal action against them.

In addition to this employees ought to be given a handsome compensation in order to make up for taking early retirement.

How to Layoff Employees?

Nowadays organizations to stand strong in the business market have to face several challenges. So in order to compete and sustain the position, employers have to take few tough decisions such as downsizing or restructuring the workforce. Though they are painful steps for the employer, but the support and strength they get through it will be very vital for the organization.

No matter what crisis the organization faces, the employer’s need to make sure that every recovery step taken should be done in a professional manner. Now if the company has decided to downsize workforce, then doing layoffs the right way is very important.

Here are a few factors that need to be considered while finalizing and making effective layoffs decisions.

  1. Skillset of the employees
  2. Attendance
  3. Employee work Performance
  4. Tenure
  5. Education/ Highest degree
  6. Productivity
  7. Years of experience
  8. Classification of the job
Advantages of Laying off Employees Disadvantages of Laying off Employees
Ensures that you have the best employees on your team It involves a number of legal problems
It is good as you have mainly experienced employees on board Increases the burden of the employees who have been retained
Causes other employees to pull up their socks Lowers the morale of all the employees in general
It is a very cost effective option Employees may start seeking employment elsewhere
WordPress Table

Advantages of Laying off Employees:

1. Ensures that you have the best employees on your team:

One of the biggest advantages of carrying out employee layoffs on the basis of performance is that it ensures that only the best employees are retained. These individuals, by virtue of how good they are at the job will surely be successful in taking the company to the top once again.

Trying to build the company from rock bottom will require the services of the best employees. A company will never be able to make it big again if its employees are not fully devoted to the cause. The employees will need to work round the clock in order to yield rich dividends.

2. It is good as you have mainly experienced employees on board:

Another major plus point of employee layoffs, especially if done on the basis of seniority is that, it ensures that only the most experienced people of the company are retained. Such individuals have been around for the longest time and they know the ropes of the business well.

By virtue of their wisdom as well as experience they can work well independently and that do not constantly need to be micromanaged.

Owing to the fact that the manager or boss has known these individuals for a long time, that is why they can easily be trusted. For a company to success, there must be an element of trust between employee and employer.

3. Causes other employees to pull up their socks:

When a company resorts to laying off it employees, it means that all is not well and that anyone who is not working in a proper manner will be asked to leave. Such mass layoffs, to some extent do create a sense of fear in all the employees causing them to pull up their socks and give their 100% under all circumstances.

In addition to this, employees know that if they do not pull their weight then it will not be long before the company will have to shut their doors permanently. When this happens, then they would all be rendered unemployed.

4. It is a very cost effective option:

If a company is facing financial woes and is unsure about what to do in order to make amends immediately, layoffs is a step which is very cost effective indeed and it ensures that only those who are doing good work are kept on.

Laying off employees helps the company save a great deal of money instantly and helps them to keep the company from sinking. In this day and age, money is a valuable resource and no company should waste it or squander it off on useless things. If they do this then they are sure to repent in time to come.

Disadvantages of Laying off Employees:

1. It involves a number of legal problems:

Laying off employees is something which needs to be done very carefully indeed. If the company is not careful about every step which they are taking then they are going to land themselves in a lot of trouble.

The major disadvantage of laying off employees therefore is the legal woes that follow, which often come with a huge fine. If a company is already facing money issues then fines like this become near impossible to pay.

2. Increases the burden of the employees who have been retained:

A major disadvantage of an employee layoff is that it increases the work load of the other employees in the office. Increasing the workload of the others means that their stress levels automatically increase causing them to come in for all kinds of health issues like heart disease and even high blood pressure.

A mass layoff in order to save company money takes a toll on all the employees including the boss.

As a result of this, the quality of work which is delivered by these burdened employees deteriorates and they are unable to come up with exceptional ideas and thoughts.

3. Lowers the morale of all the employees in general:

Employee layoffs in general lowers the morale of all the employees especially those whose close friends and acquaintances have been shown the door. Under such circumstances working becomes rather tough and the general atmosphere in the office is not upbeat.

To cope with such a situation companies should ensure that they have some workshops or even some professional who can speak to the employees so that they can deal with the problem.

Companies at this point should try and bring together the employees who have been retained so that they can work as a comprehensive unit.

4. Employees may start seeking employment elsewhere:

A major disadvantage of mass layoffs is that the employees who have been retained know that the company is in trouble and rather than working extra hard, they try and seek employment in another company as soon as possible.

5. Shows the company in poor light:

Finally, layoffs do negatively affect the reputation of the company as it spells out loud and clear that the company is having some shortage in funds. This in turn prevents clients from investing their money in such a company.

When the going gets tough, then companies often do not have any other option rather than to lay off its employees. This is a step which needs to be taken in order to prevent the company from shutting down.

The higher authorities would never take a step like this unless it is absolutely necessary and unless things are really going downhill for them.

As and when possible, companies do look out for the well being of its employees, yet when things become too impossible to manage, this is an extreme step which they must resort to in order to attempt to get the company back on its feet. Even the top most companies do layoff employees when they feel like it is the right thing to do.