Niki Jorgensen is a director of service operations for Insperity, a provider of human resources and business performance solutions. Views are the author's own.
Layoffs gained national attention during the last few years for various reasons and provided a glimpse into employers’ tactics for handling the process. While it is a less desirable and unfortunate responsibility of doing business, layoffs are a reality that all too often can result in employer missteps.
Companies should have a plan in place for handling layoffs in the event they become a required measure. In some cases, HR leaders may not have adequate notice to prepare for layoffs and this is when mistakes can occur that may lead to a PR crisis, legal disputes or potential fines and penalties.
Below are six best practices for business leaders to consider as they develop layoff plans.
Define business reasons and criteria
Executive management should define the business reasons for layoffs so they can be consistently articulated throughout the process. Communicating the business basis is key to protecting the company’s credibility and complying with employment laws.
Leaders should establish a systematic process with specific criteria for those who will be laid off based on business goals. Clear and objective standards should be used such as tenure, performance review ratings, job classification, attendance and skill sets. Consider whether to lay off one person from each department or an entire group. Identify any employees needed for a transitional period and determine how long they should stay.
Analyze and review selections
It is critical for leaders to analyze and review the list of employees selected for layoffs, especially related to protected classes. If the percentage of any protected class is disproportionately terminated, measurable criteria should be available to substantiate the choice. For instance, cost of pay as the criteria can affect many workers over age 40. It is best to consult with an HR professional and/or employment practice attorney before selections are finalized.
Leaders should carefully review federal regulations and any state legislation that are associated with layoffs. The Worker Adjustment and Retraining Notification (WARN) Act, for example, is a federal law that was passed to provide workers with sufficient time to prepare for the transition between their current jobs and new jobs. The WARN Act requires employers with 100 or more full-time workers that are laying off at least 50 people at a single site to provide 60-day advance written notice of mass layoffs and covered plant closings. With ever-changing employer-related rules and regulations, it is a good idea for HR teams to stay up to date by accessing government websites that cover employment law and subscribing to relevant resources.
Consider severance packages
Businesses that offer severance packages are making a strategic decision that helps alleviate some of the stress for affected employees and may reduce the chances of legal action. Severance packages can include a number of benefits that support workers during a transitional period such as salary continuation, vacation pay, continued benefits coverage, outplacement assistance and employer-paid COBRA premiums. Some states have mandatory severance criteria, so leaders should conduct further research.
Leaders should take care with a decision to offer severance packages, which not only help employees through a difficult time, but also generate goodwill for employers.
Prepare layoff packets
Layoff packets should be prepared to distribute to managers and supervisors who will be conducting meetings with affected employees. The layoff packets help to consolidate important documents, materials and resources that are valuable to employees for reference, and they streamline the process for managers when meeting with employees.
Packets typically include COBRA information and next steps, contact information for local unemployment agencies, verification documents with confirmation of employment, including dates of employment and titles, retirement information about individual 401(k) balances and next steps, any releases, if applicable, including release of discrimination claims for employees to sign, assistance with outplacement resources and an offer to provide letters of recommendation.
Communicate the layoffs
It is important for leaders to work closely with the corporate communications team to develop accurate and clear messaging that includes the business reasons for the layoffs, which will be used for the official announcement and press release, internal communication, individual and group meetings. All employees should be notified about the layoffs via a company meeting and email, and then individual meetings should be conducted with employees who will be laid off. Affected employees should be reassured that it is not a reflection of their performance or their fault.
Follow-up meetings with remaining teams should be held to reassure them about the company’s future. Companies should have a unified approach with consistent messaging across all mediums to ensure accuracy and tone that facilitates an effective process, albeit emotional.
Business leaders who proactively develop layoff plans are positioning their companies to handle a stressful process in a more strategic and calm manner if the situation arises.