Layoff
Encyclopedia
Layoff also called redundancy in the UK, is the temporary suspension or permanent termination of employment
of an employee or (more commonly) a group of employees for business
reasons, such as when certain positions are no longer necessary or when a business slow-down occurs. Originally the term layoff referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. The term however nowadays usually means the permanent elimination of a position, requiring the addition of "temporary" to specify the original meaning.
Many synonyms such as downsizing exist, most of which are euphemism
s and more abstract descriptions of the process, most of which can also be used for more inclusive processes than that of reducing the number of employees. Downsizing is the "conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness". Since the 1980s, downsizing has gained strategic legitimacy. Indeed, recent research on downsizing in the U.S., UK, and Japan suggests that downsizing is being regarded by management as one of the preferred routes to turning around declining organisations, cutting costs, and improving organisational performance, most often as a cost-cutting measure.
s are often used to "soften the blow" in the process of firing and being fired. The term "layoff" originally meant a temporary interruption in work (and usually pay). The term became a euphemism for permanent termination of employment and now usually means that, requiring the addition of "temporary" to refer to the original meaning. Many other euphemisms have been coined for "(permanent) layoff", including "downsizing", "excess reduction", "rightsizing", "delayering", "smartsizing", "redeployment", "workforce reduction", "workforce optimization", "simplification", "force shaping", "recussion", and "reduction in force" (also called "RIF", especially in the government employment sector).
"Mass layoff" implies laying off a large number of workers. "Attrition" implies that positions will be eliminated as workers quit or retire. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. While "redundancy" is a specific legal term in UK labour law, it may be perceived as obfuscation
. Firing
s imply misconduct or failure while layoffs imply economic forces beyond the employer's control, especially in the face of a recession such as the one that began in the late 2000s
.
. In many U.S. states, workers who are laid off can file an unemployment claim and receive compensation. Depending on local or state laws, workers who leave voluntarily are generally ineligible to collect unemployment benefits, as are those who are fired for gross misconduct. Also, lay-offs due to a firm's moving production overseas may entitle one to increased re-training benefits. Some companies in the United States utilize Supplemental Unemployment Benefits. Since they were first introduced by organized labor and the Department of Labor in the early 1950s, and first issued in a Revenue Ruling by the IRS in 1956, SUB-Pay Plans have enabled employers to supplement the receipt of state unemployment insurance benefits for employees that experience an involuntary layoff. By establishing severance payments as SUB-Pay benefits, the payments are not considered wages for FICA, FUTA and SUI tax purposes, and employee FICA tax. To qualify for SUB-Pay benefits, the participant must be eligible for state unemployment insurance benefits and the separation benefit must be paid on a periodic basis.
Certain countries (e.g. France
and Germany
), distinguish between leaving the company of one's own free will, in which case the person isn't entitled to unemployment benefits and leaving a company voluntarily as part of a reduction in labour force size, in which case the person is entitled to them. An RIF reduces the number of positions, rather than laying off specific people, and is usually accompanied by internal redeployment. A person might leave even if their job isn't reduced, unless the employer has strong objections. In this situation, it's more beneficial for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they find new jobs while still being paid by their old companies, costing nothing to the social security system in the end.
There have also been increasing concerns about the organisational effectiveness of the post-downsized ‘anorexic organisation’. The benefits, which organisations claim to be seeking from downsizing, centre on savings in labour costs, speedier decision making, better communication, reduced product development time, enhanced involvement of employees and greater responsiveness to customers (De Meuse et al. 1997, p. 168). However, some writers draw attention to the ‘obsessive’ pursuit of downsizing to the point of self-starvation marked by excessive cost cutting, organ failure and an extreme pathological fear of becoming inefficient. Hence ‘trimming’ and ‘tightening belts’ are the order of the day (Tyler and Wilkinson 2007)
Termination of employment
-Involuntary termination:Involuntary termination is the employee's departure at the hands of the employer. There are two basic types of involuntary termination, known often as being "fired" and "laid off." To be fired, as opposed to being laid off, is generally thought of to be the employee's...
of an employee or (more commonly) a group of employees for business
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
reasons, such as when certain positions are no longer necessary or when a business slow-down occurs. Originally the term layoff referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. The term however nowadays usually means the permanent elimination of a position, requiring the addition of "temporary" to specify the original meaning.
Many synonyms such as downsizing exist, most of which are euphemism
Euphemism
A euphemism is the substitution of a mild, inoffensive, relatively uncontroversial phrase for another more frank expression that might offend or otherwise suggest something unpleasant to the audience...
s and more abstract descriptions of the process, most of which can also be used for more inclusive processes than that of reducing the number of employees. Downsizing is the "conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness". Since the 1980s, downsizing has gained strategic legitimacy. Indeed, recent research on downsizing in the U.S., UK, and Japan suggests that downsizing is being regarded by management as one of the preferred routes to turning around declining organisations, cutting costs, and improving organisational performance, most often as a cost-cutting measure.
Terminology
EuphemismEuphemism
A euphemism is the substitution of a mild, inoffensive, relatively uncontroversial phrase for another more frank expression that might offend or otherwise suggest something unpleasant to the audience...
s are often used to "soften the blow" in the process of firing and being fired. The term "layoff" originally meant a temporary interruption in work (and usually pay). The term became a euphemism for permanent termination of employment and now usually means that, requiring the addition of "temporary" to refer to the original meaning. Many other euphemisms have been coined for "(permanent) layoff", including "downsizing", "excess reduction", "rightsizing", "delayering", "smartsizing", "redeployment", "workforce reduction", "workforce optimization", "simplification", "force shaping", "recussion", and "reduction in force" (also called "RIF", especially in the government employment sector).
"Mass layoff" implies laying off a large number of workers. "Attrition" implies that positions will be eliminated as workers quit or retire. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. While "redundancy" is a specific legal term in UK labour law, it may be perceived as obfuscation
Obfuscation
Obfuscation is the hiding of intended meaning in communication, making communication confusing, wilfully ambiguous, and harder to interpret.- Background :Obfuscation may be used for many purposes...
. Firing
Firing
Dismissal is the termination of employment by an employer against the will of the employee. Though such a decision can be made by an employer for a variety of reasons, ranging from an economic downturn to performance-related problems on the part of the employee, being fired has a strong stigma in...
s imply misconduct or failure while layoffs imply economic forces beyond the employer's control, especially in the face of a recession such as the one that began in the late 2000s
Late 2000s recession
The late-2000s recession, sometimes referred to as the Great Recession or Lesser Depression or Long Recession, is a severe ongoing global economic problem that began in December 2007 and took a particularly sharp downward turn in September 2008. The Great Recession has affected the entire world...
.
Common abbreviations for reduction in force
- RIF - A generic reduction in force, of undetermined method. Often pronounced like the word riff rather than spelled out. Sometimes used as a verb, as in "the employees were pretty heavily riffed".
- eRIF – Layoff notice by email.
- IRIF - Involuntary reduction in force - The employee(s) didn't voluntarily choose to leave the company. This usually implies that the method of reduction involved either layoffs, firings, or both, but wouldn't usually imply resignations or retirements. If the employee is fired rather than laid off, the term "with cause" may be appended to indicate that the separation was due to this employee's performance and/or behavior, rather than being financially motivated.
- VRIF - Voluntary reduction in force - The employee(s) did play a role in choosing to leave the company, most likely through resignation or retirement. In some instances, a company may exert pressure on an employee to make this choice, perhaps by implying that a layoff or termination would otherwise be imminent, or by offering an attractive severance or early retirement package.
- WFR - Work force reduction.
Unemployment compensation
The method of separation may have an effect on a former employee's ability to collect whatever form of unemployment compensation might be available in their jurisdictionJurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...
. In many U.S. states, workers who are laid off can file an unemployment claim and receive compensation. Depending on local or state laws, workers who leave voluntarily are generally ineligible to collect unemployment benefits, as are those who are fired for gross misconduct. Also, lay-offs due to a firm's moving production overseas may entitle one to increased re-training benefits. Some companies in the United States utilize Supplemental Unemployment Benefits. Since they were first introduced by organized labor and the Department of Labor in the early 1950s, and first issued in a Revenue Ruling by the IRS in 1956, SUB-Pay Plans have enabled employers to supplement the receipt of state unemployment insurance benefits for employees that experience an involuntary layoff. By establishing severance payments as SUB-Pay benefits, the payments are not considered wages for FICA, FUTA and SUI tax purposes, and employee FICA tax. To qualify for SUB-Pay benefits, the participant must be eligible for state unemployment insurance benefits and the separation benefit must be paid on a periodic basis.
Certain countries (e.g. France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
and Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
), distinguish between leaving the company of one's own free will, in which case the person isn't entitled to unemployment benefits and leaving a company voluntarily as part of a reduction in labour force size, in which case the person is entitled to them. An RIF reduces the number of positions, rather than laying off specific people, and is usually accompanied by internal redeployment. A person might leave even if their job isn't reduced, unless the employer has strong objections. In this situation, it's more beneficial for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they find new jobs while still being paid by their old companies, costing nothing to the social security system in the end.
There have also been increasing concerns about the organisational effectiveness of the post-downsized ‘anorexic organisation’. The benefits, which organisations claim to be seeking from downsizing, centre on savings in labour costs, speedier decision making, better communication, reduced product development time, enhanced involvement of employees and greater responsiveness to customers (De Meuse et al. 1997, p. 168). However, some writers draw attention to the ‘obsessive’ pursuit of downsizing to the point of self-starvation marked by excessive cost cutting, organ failure and an extreme pathological fear of becoming inefficient. Hence ‘trimming’ and ‘tightening belts’ are the order of the day (Tyler and Wilkinson 2007)
See also
- Compromise agreementCompromise agreementIn the United Kingdom, a compromise agreement is a specific type of contract, regulated by statute, between an employer and its employee under which the employee receives a negotiated financial sum in exchange for agreeing that he or she will have no further claim against the employer as a result...
- Displaced workersDisplaced workersDisplaced workers refers to workers 20 years of age and older who have lost or left their jobs because their company has closed or moved, there was insufficient work for them to do, or their position or shift was abolished.-External links:...
- FurloughFurloughIn the United States a furlough is a temporary unpaid leave of some employees due to special needs of a company, which may be due to economic conditions at the specific employer or in the economy as a whole...
- Office SpaceOffice SpaceOffice Space is a 1999 American comedy film satirizing work life in a typical 1990s software company. Written and directed by Mike Judge, it focuses on a handful of individuals fed up with their jobs portrayed by Ron Livingston, Jennifer Aniston, Gary Cole, David Herman, Ajay Naidu, and Diedrich...
(1999 motion picture) - OutsourcingOutsourcingOutsourcing is the process of contracting a business function to someone else.-Overview:The term outsourcing is used inconsistently but usually involves the contracting out of a business function - commonly one previously performed in-house - to an external provider...
- RestructuringRestructuringRestructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs...
- Severance packageSeverance packageA severance package is pay and benefits an employee receives when they leave employment at a company. In addition to the employee's remaining regular pay, it may include some of the following:* An additional payment based on months of service...
- Termination of employmentTermination of employment-Involuntary termination:Involuntary termination is the employee's departure at the hands of the employer. There are two basic types of involuntary termination, known often as being "fired" and "laid off." To be fired, as opposed to being laid off, is generally thought of to be the employee's...
- UnemploymentUnemploymentUnemployment , as defined by the International Labour Organization, occurs when people are without jobs and they have actively sought work within the past four weeks...
- Voluntary RedundancyVoluntary redundancyVoluntary redundancy is a financial incentive offered by an organisation to its employees with the purpose of attracting volunteers to leave the organisation, due to downsizing or restructuring situations. The purpose is to circumvent union employee regulation laws.-Reasons:A Voluntary Redundancy...
- Work sharing
Further reading
- Weinstein, BruceBruce WeinsteinBruce Weinstein is an American ethicist who hosts "Ask the Ethics Guy!," a question-and-answer series on Bloomberg Businessweek online and writes an ethics column there...
, "Downsizing 101", BusinessWeekBusinessWeekBloomberg Businessweek, commonly and formerly known as BusinessWeek, is a weekly business magazine published by Bloomberg L.P. It is currently headquartered in New York City.- History :...
magazine, September 12, 2008.
External links
- Layoff Support Network Social Networking, Support and Job Search site for laid off people and their loved ones.
- Layoffmaps.com Self-reported layoffs and layoff news on the map.
- Reduction in Force Wiki Resource for Organizations
- How to Prepare for a Layoff - Article that discusses specific steps to take to prepare for a transition.
- CASE No.: 2001-ERA-19 A case before the U.S. Department of Labor, wherein the terms RIF, IRIF, and VRIF are commonly used.
- APPENDIX D; GLOSSARY OF TERMS A glossary in a U.S. Department of Energy document that includes brief definitions of RIF, IRIF, and VRIF.
- Summary of Reduction in Force Under OPM's Regulations, United States Office of Personnel ManagementOffice of Personnel ManagementThe United States Office of Personnel Management is an independent agency of the United States government that manages the civil service of the federal government. The current Director is John Berry.-History:...
- UK Redundancy Legal Rights UK specific information on the legal rights of those being made redundant.
- Airline Industry Layoffs - by Patrick Smith
- Furloughed, Now What? - in Cabin Managers.
- Layoff Tracker - listing of major U.S. layoffs since January 1, 2009.
- Most Notable IT Industry Layoffs of 2008
- Microenta is a global partner within career transition solutions
- Job Losses Tracker (UK-based)
- Layoff news and tracker Layoffs news and tracker.
- Rising After Redundancy - RTÉ Ireland TV Series
- Layoffs Since President Obama Started in office
- Redundancy advice
- Dealing With Redundancy - Article offering advice on how to deal with being made redundant.