HR Glossary


A layoff can be a very difficult task to face for any HR supervisor. And with the pandemic hitting the job market severely, layoffs have become very common. 

In case your organization initiates a layoff, understanding the process will help that time. In addition, proper communication and planning will have some positive effects on the laid-off employees and the remaining staff and clients too.

Hence we must discuss what are layoffs and how does it affect an organization.

What is Layoff ? 

A layoff, also known as employee reduction, is the downsizing of an organization’s workforce by suspension or permanent termination of a worker or group of workers by the employer. Layoffs to an employee are not given due to their performance or breach of duty.

People are usually laid off because of a decrease in revenue rate, decline in sales, or some other kind of financial trouble.

What causes Layoff ? 

Some of the common reasons for layoffs are:

Cost reducing measures

This could be due to fewer sales or no financial backing by investors in the company. And of the ways a company can save money is by eliminating some employees and allocating that fund for something else.


When two companies or two branches of the same company combine. During a merger, the company may choose to lay off a few employees because there might be duplicate positions within the branch or organization.

Loss of fund

Loss of investors or sales can lead to loss of a company’s funds, making them unable to stay in the financial position to pay employees.

Technological advancements

With the increase in the advancement of technology, automation has become very common in business. Hence, due to that, some employers may lay off employees to decrease position redundancies.

Company relocation

Some stakeholders may decide to relocate the company to a different part of the country, in that case, the employees who are unable to relocate are laid off.

How does a Layoff affect an organization ? 

Layoff introduces missing links in the team that affect the company in a lot of ways. It may seem minor but can cause a ripple effect in the workforce. 

You may think about laying off employees to save money but end up spending more money due to the same. As you may need to issue severance pay to the departing employee, or the overtime pay to the remaining employees, etc.

By taking this step, you send out a message to the customer that the organization is going through some kind of crisis. This can leave a negative impact on customer retention.

How should you plan your Layoff ?

Some things that must be taken care of and planned before starting the process of employee reduction are:

  • Notify the HR consultant as soon as it becomes that you will be facing a complex layoff situation.
  • Identify all the positions that will be affected during this.
  • Make a list of all the employees who need to know about the layoffs, like senior managers and business partners.
  • Evaluate if the current structure would be able to meet the unit goals.
  • Make sure that your revised work configuration plan is compatible with your budget. 
  • Identify any security issues and consult with the team about the same.

We hope this article helped you. Explore our HR Glossary for more interesting articles.

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