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 consider letting staff go to keep your business operating and profitable. Before you make a final decision, consider these factors.
Before letting people go
Terminating employees permanently or laying them off temporarily may save your business money, but both 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 terminating employees could include:
- Costs for termination pay and any benefits or vacation pay
- Loss of experience and expertise
- Increased time needed to reorganize and train remaining employees
- Costs of future rehiring and training when business opportunities improve
- Decrease in productivity from low morale
- Departure of employees who want to leave on their own terms
- Negative impact to your brand
- Reduction of your company’s overall capacity
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.
In Alberta, the maximum duration of a temporary layoff is 60 days within a 120-day period. On the 61st day of a temporary layoff, an employee’s employment is considered terminated and the employer must pay termination pay. The period of a temporary layoff can be extended beyond 60 days under certain situations. For more information, visit the Employment Standards website.
Alternatives to termination
Terminating 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. Engaging your employees in the process can go a long way toward obtaining their support for the savings you have to achieve.
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, looking for less expensive space or encouraging employees to work from home
- Meeting online to reduce travel costs
- Using digital documents to save on office supplies
These strategies may require 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:
- Reduce hours of work, for instance by shortening the work week or using the Government of Canada's Work-Sharing program
- Cut overtime or offer time off in lieu of overtime pay
- Offer temporary leaves of absence and early retirement
- Offer shares in lieu of pay
- Reduce pay, benefits, and bonuses
- Ask for voluntary resignations
- Freeze new hires
- Opt for temporary layoffs
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 website.
Best practices when letting staff go
If terminations 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. The larger the group of employees to be laid off, the more notice is required. See group terminations for details.
- Ensure you understand Alberta and Canada labour and human rights legislation.
- Consult union and industry associations as required.
Establish clear criteria for the terminations based on the skills and performance of each employee and your current and future business needs. Document your business reasons for the reductions, including:
- The alternatives you considered before deciding on terminations
- Your financial analysis
- Your rationale for which employees to let go
Prior to starting the terminations, have a plan in place. Consider using a script to ensure accurate and consistent communication with each employee. A checklist covering items like return of company property and compensation can ensure each employee is treated the same way.
During the termination process:
- Be efficient and compassionate.
- Ensure the necessary management staff are in place to meet with 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 termination notice and/or pay.
To help employees adjust, refer them to your company’s employment assistance program or to an Alberta Supports Centre. There are also many helpful resources available online, such as:
- The Government of Alberta’s Services for Employees Facing Layoffs
- Dealing With Job Loss
- Putting First Things First
- Coping With Change
- Moving On
Develop a plan to help your remaining employees deal with any feelings of anger, depression and insecurity they may feel. Terminations can be difficult to process for the employees who remain.
After letting people go
Your remaining employees may come to you with questions. Be ready to discuss the reasons for the staff reductions and address any concerns about your company’s future. Be prepared to explain why each employee was kept 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 termination the right way will not only benefit the employees you are letting go but also your business. Former employees will talk about your business and the way they were treated. Following these suggestions for how to handle terminations 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.
Speak to a workforce consultant
The Government of Alberta has workforce consultants across the province who specialize in helping employers tackle workforce challenges and navigate programs and services. Find your local workforce consultant by visiting the Workforce Contacts and Employer Resources page.