How to Handle Layoffs: A Guide for HR to Avoid 4 Most Common Mistakes

One of the most complex parts of being the key decision-maker in a company is the prospect of layoffs looming over your head. In today’s economic climate, this is an inescapable reality for everyone, from SaaS companies to private equity firms. Whether to improve your company’s financial standing or weather a recession, letting go of your employees is never easy. 

Still, there is a ‘right’ way to handle layoffs so they have minimal impact on you, your company, and your employees. One that is steeped in empathy, transparency, and supportiveness. Read on to discover how to build a layoff strategy that truly understands and respects the human element, incorporating these themes and some common mistakes you should avoid.

Why The Way You Handle Layoffs Matters

Laying off employees is sometimes a necessary evil that can also have long-term repercussions on your company. Although terminations will never be portrayed positively, you can minimize their negative impact on your company and workforce. 

If handled well, layoffs can protect your brand as an employer. This can mean current employees leaving for more secure employment or future candidates refusing to work at your company. This is your opportunity to build trust and show current and future employees that you are supportive, caring, and respectful even during difficult times.

Layoffs are bound to negatively influence company morale, but you can minimize these influences with the steps you take. It’s crucial to make employees feel valued, involved and heard throughout the process. This is especially important after the layoffs when your remaining employees navigate immense uncertainty and change. 

Best Practices for Handling Layoffs

1. Consider All Your Options

Layoffs aren’t the only way to cut costs and bolster your company’s finances. According to a Harvard Business School study on the hidden costs of layoffs, although layoffs can be effective in some circumstances, at other times, such as during a recession, they aren’t as successful as most people think. Even when layoffs help cut costs or improve share earnings, they can significantly impact your company and brand, employee morale and productivity, and customer trust.

Before downsizing, consider alternatives that could prove more effective in the long run. These options include organization-wide pay cuts, mandatory furloughs, benefits cuts, staff or job sharing, reduced working hours, hiring freezes, or a reduction in executive compensation. If you are still determining the best option, consider opting for HR outsourcing services to help you make an educated decision.

2. Plan Ahead

If you decide layoffs are the best option, create a detailed strategy for what you plan to do before, during, and after. Your strategy should include:

• Criteria for choosing which employees to lay off.
• An effective communication plan.
• A training plan to prepare managers.

You must also ensure that you have covered all your bases from a legal standpoint. Confirm that you comply with labor laws and regulations, such as notice periods and severance package expectations. Make sure your layoff criteria are not biased or impacting protected groups. Experts specializing in HR services for SaaS companies can help you with these time-consuming yet crucial tasks. 

3. Involve Managers at Every Step

Managers play a crucial role in the layoff process. Their close collaboration with the human resources team can ensure effective communication and support for the affected employees. Given their existing rapport with their direct reports, managers are best positioned to convey information during layoffs. 

As part of the planning process, employee relations should train managers to handle layoffs effectively, address employees’ questions and concerns, offer support where needed, and maintain morale. Managers should also be trained to practice empathy, transparency, and compassion throughout the process.

4. Prioritize Transparency & Communication

The hallmark of well-orchestrated layoffs is not just transparency, but also two-way communication between employees and decision-makers. Frequent, open, and honest communication from senior leaders will not only help build trust but also preserve your employer’s brand, making your employees feel reassured and secure.

A comprehensive communication plan is a cornerstone of a well-orchestrated layoff. It should inform employees of the reasons for layoffs, help them understand the criteria used, and support your remaining employees with navigating post-layoff changes. This plan should also include a PR strategy to bolster your company’s public image and prepare for any subsequent backlash from the media or disgruntled employees.  

Your communication plan should also include a PR strategy that helps bolster your company’s public image. This strategy will also prepare you for any subsequent backlash from the media or disgruntled employees.

5. Offer Effective Support

Getting laid off can have far-reaching impacts on both employees and their families. Support affected employees through this difficult time and equip them with the resources they need to find success elsewhere. This will signal your employees that you care about them and their future success.

In addition to a severance package, consider offering employees career coaching, outplacement services, and continued health coverage. Work closely with your employee relations team to determine how best to support your employees through this transition.

6. Focus on Your Remaining Employees

The period after layoffs is critical for your company culture and remaining employees. This is the time to focus on employee experience to help preserve any remaining culture and morale. 

Turn your attention to your remaining employees, help them navigate organizational changes, and alleviate anxieties around uncertainty. Recognize and reward high-performing employees, and work with your talent management team to offer upskilling opportunities. This will help your employees feel valued for their contributions and reassure them when they feel insecure about their jobs.

Common Mistakes to Avoid

• Being Hasty or Unprepared: Many companies need more planning to conduct layoffs and start the process. Layoffs are not always the best option and can do more harm than good if handled poorly. Be thorough and strategic in your planning to ensure that this is your best decision and that you have covered all your bases.
• Applying a One-Size-Fits-All Approach: A blanket rule, such as a 5% personnel cut, across all your departments and business units is not adequate. Be strategic about which areas can be streamlined without negatively impacting your operations or bottom line in the long run. 
• Minimizing Leadership Visibility: It can be tempting for leaders to stay far away from the layoff process to minimize employee backlash. However, this is when employees most need to hear from their leaders. Exhibiting authentic leadership is critical to building trust and ensuring continued business success.
• Overlooking Legal Compliance: Do your due diligence so your layoffs do not cause legal ramifications. Prioritize legal compliance in your planning phase to ensure that your layoff strategy is not discriminatory and aligns with any special considerations or legal requirements.

Final Thoughts

Although layoffs may not be the only way to shore up your company financially, they are sometimes unavoidable. While this process has significant benefits, it can also impact employee morale, company brand, and long-term operations if mishandled. You can minimize layoffs’ impact on your company by prioritizing empathy, transparency, and respect throughout the process.

Want to know more about managing employee relations during layoffs? In addition to taxes, accounting, bookkeeping, and CFO services through its FinOps, Escalon’s Essential Business Services include PeopleOps (HR, benefits, recruiting, and payroll) and Risk (business insurance). Talk to an expert today.