As an employer or human resources manager, you value your employees and what they contribute to your business. But when the competitive landscape changes or your business is facing a difficult financial situation, you may be considering layoffs to keep your business operating and profitable.
Before you make a final decision about layoffs, consider these factors to help you make the best decisions for your business and your employees.
Before letting people go
Layoffs may save your business money, but they come at a price. Consider whether your business can run efficiently and turn a profit without the employees you are considering letting go.
The impact of layoffs could include:
- severance pay and any benefits or vacation pay for laid off employees
- the loss of experience that leaves with that employee
- the time needed to reorganize and train remaining employees
- the costs of future rehiring and training when business opportunities improve
- a dip in productivity from low morale
- losing employees who decide they want to leave on their own terms
- having your brand suffer because of the layoffs.
When making business decisions, evaluate all the impacts to ensure you are making an informed decision that will result in the best possible outcome for your business and employees.
Alternatives to layoffs
Laying off employees may seem like the only course of action, but there are alternatives to consider. Involve your employees in your decision-making process by explaining why changes need to be made and ask for ideas or possible alternatives.
Consider the impact of other cost-cutting strategies such as:
- reducing inventory by changing the supply chain
- eliminating products or services to focus on your most profitable activities
- leasing warehouse and office space, look for less expensive space or encourage employees to work from home
- meeting online to reduce travel costs
- using digital documents to save on office supplies.
Of course, these strategies will also have impacts you may want to consider, such as looking at your work flow or purchasing equipment to make your business more efficient.
If you need to reduce costs further, consider changes to employee compensation. You could:
- offer shares in lieu of pay
- reduce hours of work, for instance by shortening the work week or by utilizing the Government of Canada's WorkSharing program
- cut overtime or offer time off in lieu of overtime pay
- offer temporary leaves of absence and early retirement
- reduce pay, benefits and bonuses
- opt for temporary layoffs
- ask for voluntary resignations
- freeze new hires.
As well, asking your employees for ideas and suggestions can go a long way toward obtaining their support for the savings you have to achieve.
Obtain legal advice if needed and consider employment standards before making any changes to employee compensation. Learn more by reviewing the Employment Standards Tool Kit for Employers and the Employment Standards Fact Sheets.
The Government of Alberta has workforce consultants across the province who specialize in helping employers tackle workforce challenges and navigate programs and services available to employers. Connect with a Workforce Consultant by calling the toll-free Employer Hotline at 1-800-661-3753 or emailing the Employer Hotline at ABWorkforce@gov.ab.ca.
Best practices when laying off staff
If layoffs are inevitable, following best practices will benefit your employees and your business.
Be aware of, and follow, all legal requirements:
- Notify the Government of Alberta if you are going to be terminating 50 employees or more in a 4-week period.
- Be sure you understand Alberta and Canada labour and human rights legislation.
- Consult union and industry associations as required.
Establish clear criteria for the layoffs based on the skills and performance of each employee and your current and future business needs. Document your business reasons for the layoffs, including:
- the alternatives you considered before deciding on layoffs
- your financial analysis
- your rationale for which employees to layoff.
Prior to starting the layoffs, have a plan in place. Consider using a script to ensure accurate and consistent communication with each laid-off employee. A checklist covering items like return of company property and compensation can ensure each employee is treated the same way.
If layoffs are necessary, develop a plan to help your remaining employees deal with any feelings of anger, depression and insecurity they may feel. Layoffs can be difficult to process for the employees who remain.
During the layoffs:
- be efficient and compassionate
- have the necessary management staff in place to meet with the laid-off employees individually
- ask employees not to notify others until all impacted employees have received notice
- provide notice in writing consistent with Alberta’s Employment Standards Code for the amount of notice and severance pay.
To help employees adjust to being laid off, refer them to an employment assistance program, if your company has one, or to an Alberta Works Centre where Albertans can explore their career and training options and find jobs. There are also many helpful resources available online, such as:
- The Government of Alberta’s Services for Employees Facing Layoffs
- Thinking about Layoffs: What you need to know before letting people go
- Dealing With Job Loss
- Putting First Things First
- Coping With Change
- Moving On
After the layoffs
Your remaining employees may come to you with questions. Be ready to discuss the reasons for the layoffs and to address any concerns about your company's future. Be prepared to explain why each employee was kept on and to communicate any plans for reassigning employee responsibilities and providing retraining.
You may also want to plan how you can boost employee morale by openly discussing ways to achieve business goals, scheduling team-building sessions and rewarding individual employees for outstanding performance.
Protect your reputation as an employer
Handling a layoff the right way will not only benefit the employees you are laying off but also your business. Laid off employees will talk about your business and the way they were treated. Following these suggestions for how to handle layoffs will protect the reputation of your business and make it easier for you to hire top-notch employees in the future when new business opportunities arise.