How to prepare and communicate layoffs

20 minutes

Checklist

Create a planning document and checklist to keep track of all the tasks.

👉 Here`s a sample .

Explore alternatives

Convene a “core decision-making group” and explore alternatives 

It goes without saying that layoffs have a tremendous impact on both the terminated and remaining employees and should not be taken lightly. Employees will want to know if other options were explored before layoffs were decided on.

Pull together a core group (as small as possible) to explore and evaluate options. The group may include founders and the board, or the executive team and must include in-house or external legal counsel. Be aware that when and where you meet as a group might affect speculation on the front lines - be discreet and conscientious.

Here are other alternatives you should have already considered before deciding to do layoffs:

  1. A delay or freeze in hiring: can you move hiring resources to a different quarter? Look at headcount to delay or re-prioritize hires.
  2. Reset the senior/junior employee ratio: Depending on the company, senior leaders should make up less than 5% of the headcount of your organization. If it is significantly higher, explore ways to close the gap between the compensation of senior and junior staff.
  3. Decrease perks, travel, and expenses.
  4. Furloughs: a “temporary” layoff where wages are frozen.
  5. Salary cuts: especially at the senior level.
  6. Consult with your board to see if they have other ideas on how to weather the market changes.

When considering salary cuts

Reductions across the board

To avoid large numbers of people having to be laid off, some organizations opt to reduce salaries of all employees. These salary reductions are often temporary (e.g. 1 year ) and the percentage of the cut is often determined based on someone’s salary grade (e.g. lower salary grades may be reduced by 10%, medium salary grades by 20%, and high salary grades by 30%).

Equity for Salary - swop

Cutting your top salary grades can have a large financial impact. That’s why some companies offer their senior leaders a salary reduction in exchange for an additional equity grant. Generally, these equity grants are set up with special vesting rules that are not only time based (e.g. 2 year vesting cliff), but also triggered by satisfying certain performance goals (e.g. the performance of the company over time as measured by a valuation goal).

Generally, the reduced salary won’t be offset dollar for dollar with the equity value. But, in consultation with the board, an appropriate ratio is set (e.g. $8 salary : $1 equity value).

Decide who will be laid off

Assuming you’ve already explored other options and determined that layoffs are necessary, the first step is to create a system for determining which employees will be laid off.

Ensure all layoff decisions and processes are approved by your board of directors with legal counsel present.

How many?

Decide how many people will be impacted. You may need to estimate the number at first and solidify it later in the planning process.

The instinct may be to lay off as few people as possible. But, often it’s better to cut deep and risk the problem of having to rehire. If you’re going to take on the massive emotional and cultural impact of letting people go, be sure to create more than enough savings so you and the remaining team have the cash required to survive.  Doing multiple rounds of layoffs demoralizes your team and erodes any trust and confidence they have in you.

Who?

Decide on and align your layoff selection criteria based on the future goals of the company. Be as objective as possible with your selection process:

Additional tips

Check employment laws

Note: this Pyn in written with US companies in mind. It contains high level information only.

Avoid Adverse Action/Disparate Impact

Once you have your list of employees who will be laid off, review each person on the list to determine if an adverse (disparate) impact exists for a protected class. Protected classes include individuals who are members of a certain race, color, ethnicity, national origin, religion, gender, genetic information, age (40 or over), those with a disability or those who have veteran status.

States may have additional protected classes, such as sexual orientation, marital status or smokers. Any protected class that may have a disproportionately larger percentage affected by the layoff (e.g. employees reaching retirement age) will need to be evaluated and substantiated.

Review state laws to determine if the WARN Act will apply

The Worker Adjustment and Retraining Notification Act [WARN Act] sets rules for requiring employers of more than 100 employees to give a written layoff notice of at least 60 days before any plant closing or mass layoff. A number of states have enacted “mini-WARN” legislation that extends notice requirements to smaller businesses conducting layoffs. Mini-WARN Acts often impose additional requirements that differ from federal law.

Review Older Workers Benefit Protection Act (OWBPA) Regulations for Compliance

If releases from age discrimination are used in exchange for severance pay, they must comply with the OWBPA to effectively release claims under the Age Discrimination in Employment Act. Under the OWBPA, employers also need to provide workers age 40 and over a consideration period of at least 21 days when one older worker is being separated, and 45 days when two or more older workers are being separated. Additionally, employees must receive a revocation period of at least seven days.

Review how this impacts employees on visas

There are special rules that apply to employees on H-1B status. The employer must withdraw the approval of a visa with U.S. Citizenship and Immigration Services, withdraw the approved LCA with the DOL and tender the alien worker return transportation home. These obligations do not apply to other common non-immigrant visa statuses, including TN and L-1. The employer of an O-1 alien of extraordinary ability is obligated to tender return transportation home to a terminated employee. Foreign national employees in non-immigrant status (H, L, O, TN, etc.) should be instructed to leave the United States as soon as practical following termination or furlough to avoid potential future immigration consequences.

Severance Packages and Additional Services

Decide on the severance package

You’re not obligated to provide severance under US federal law but it may lessen the chance of former employees filing legal action. Some states, however, do have specific criteria for required severance.

Severance packages may include salary continuation; vacation pay; continued, employer-paid period of benefits coverage; employer-paid COBRA premiums; outplacement services; counseling and resume services; and more.

Be consistent in your severance policy. Often, severance amounts will be based on tenure (much preferable to basing it on seniority). A common model is paying two to four weeks for every year of service, with a maximum of four or eight weeks in total. Offering less than two weeks severance pay is outside the norm, as is offering more than eight weeks.

Decide on health benefits

Timing matters. If coverage in your employee health benefits plan ends on the last day of the month (most, but not all, do), and you are executing your layoff in the last ⅓ of the month, consider designating the last day of employment for all impacted employees to be the first day of the next month.

That gives every impacted employee 30 days to figure out COBRA or get added to a partner’s health plan. Leaving employees in the lurch at the end of the month or without any continuing benefits coverage is avoidable, so do what you can to avoid it.

Determine support

How will you help employees find new jobs? Will your talent team review resumes or make intros to other companies? Explore if you can work with other companies or portfolio companies who have open jobs.

There are firms that specialize in helping employees during these times. Providing additional support like this helps employees see the decision was a business one, not a personal one.

Decide on logistics and timing 

Schedule your layoffs meetings

Use common sense and be subtle. Sending a calendar invite to an employee for a 20-minute discussion with a manager and HR representative is not. You can always create a second invitation for the HR person so they aren’t on the original 1:1 invite.

For remote employees, don’t reuse your Zoom or WebEx “personal meeting room” in back-to-back meetings. Create a new meeting for each conversation.

If you are doing these in an office, make sure invites are configured to be “private” so the room calendar for the event doesn’t show all the meetings being scheduled in it.

Who is there?

Communication with the impacted employee generally include two company representatives, ideally one from HR. If the manager is more experienced this isn’t necessary.

Decide on timing

Layoffs often range from being effective immediately to two weeks out. Some employers use a longer notification period to let impacted employees begin their search for a new job while they are still technically employed, essentially trading severance time for notification period time.

Figure out what is right for your company based on the kinds of roles being impacted, your culture, the maturity of your workforce, your level of comfort with having impacted employees continue to access systems, and legal requirements.

Decide on what to do with company property

If remote, you will be unable to collect company property (laptop, badge, etc.). Either decide this is still company property and will need to be returned at a future date — either a laptop box with a return sticker will be mailed to them or equipment can be dropped off. Or, make it clear if they are or are not allowed to use their laptop after the notification period.

For many employees, this may be their only computer and would be useful in conducting their job search. Remember that with every decision you make in this process you need to err on the side of doing whatever you can to help the impacted employee. That likely means letting them still use their laptop.

Depending on your IT security policies, you may even decide to allow employees to keep their laptop as a part of their severance, but only do that only after you recognize, understand, and accept the financial, security, and intellectual property risks that approach creates for your company.

For employees in the office, have boxes pre-ordered so that people have a way to carry out their belongings if they want to as soon as they hear the news. Or, offer them to go home immediately, leaving all company property and personal belongings behind, and send their personal belongings via courier later.

Loop in communications team

Draft and prepare all your internal messaging for all employees and create a plan for any possible press inquiries. Assume whatever email you send will be read by those leaving the company and potentially the general public. Prepare an email explaining the change, the reason, and deep appreciation for the outgoing employees’ contributions.

Ensure consistent messaging

Don’t hurt your credibility by giving different information to different audiences. Be consistent, whether you are talking with employees, the media, investors, the local community or other audiences.

You will also need to loop in IT stakeholders to have a way to quickly message everyone not impacted in the layoff. In the email, you should also announce an all-hands for later that day (ideally) or early the following day so they know they will have an interactive opportunity to hear from you.

Don’t wait to meet with the team. Remaining employees need to hear from you, and quickly.

Loop in senior leadership and management

The next group of people who should receive the news is the senior leadership who had not yet been informed or were not selectors. Try to meet in person the afternoon before the layoffs are scheduled.

Openly talk about the problem you are trying to solve and the alternatives you explored.

When discussing via video conference, don’t forget to give everyone the opportunity to ask questions. This openness and transparency is a key step in gaining their empathy and confidence in the decision and steps forward.

Next, if they weren’t already involved as selectors, then loop in people managers the morning of layoffs. You will need to ask for their help and to be available for support for those around them.

Determine communications run-sheet

Word travels fast. The sequencing and speed of how you announce layoffs matters.

A disclaimer on best-laid plans.

Stay calm when (not if) things don’t go as planned. You’ll be surprised. The news may leak too early. A colleague who has been laid-off may send his team mates an angry text message. Or the person you were meant to meet may have just stepped out to deal with a family matter.
Rely on your run sheet and steadily execute it. Tell all messengers that problems are to be expected but the most important thing for them to do is to remain calm and empathetic.

Depending on the size of your organization and lay-off, have a few people on standby who don’t have any meetings scheduled. Perhaps some senior folks in your People team. They are responsible for chasing up that person who stepped out, calm that person who is upset, or answer a question for someone in tears.

Considerations: 

Summary of who to inform when  

  1. Executives - from start.
  2. Involved HR, Legal, Finance - 60 days prior.
  3. Involved IT, Comms, Selectors (leaders who select people to be laid off) - 30 days prior.
  4. Messengers (managers who will inform affected employees) and “Back-up Team” (People providing support to Messengers on the day / involve ~5 days prior- 5 days prior.
  5. Senior leadership not yet informed - afternoon before.
  6. Managers not yet informed - morning of before individual conversations.
  7. All staff - all-staff meeting after individual conversations.
  8. Impacted employees - Day of layoffs. Allow approximately 15 minutes per conversation. Try to get all conversations done in the morning if possible.
  9. All employees. Day of layoffs. Try to get all staff together in one meeting.
  10. Those outside of your organization on an as-needed basis. If you are part of a large organization or it’s a large-scale layoff, it’s a good idea to have a standby statement ready for the media.

Keep in mind: If you’re a publicly-traded company, consult with your investor relations team because timing and sequencing will be impacted by regulatory considerations and materiality.

All-staff communications

There are 3 different groups you’ll need to communicate with: the individuals being laid off, individual teams, and the entire company.

The order in which you communicate to each group will depend on what works best for your culture. Regardless of order, the conversations should happen right after each other so that information is contained as much as possible. Here are some scenarios to consider:

Scenario 1

Send a company email or have a company All-Staff Video Conference first announcing the news. Let employees know individual invites will be sent out within the hour for those affected by layoffs. Send survivors an email to indicate they are safe. Complete individual meetings and then re-convene a company meeting with survivors, and a team meeting afterwards.

This option may be ideal in a remote or distributed environment.

Scenario 2

Individual layoff conversations. Then Company all-hands (the CEO makes the announcement). After, direct managers start having team and 1:1 conversations.

This may be the most personal approach and is often used in smaller companies with less than 800 employees.

Scenario 3

Individual layoff conversations. Then department managers announce the news to their teams. Then a company All-Staff meeting is held (the CEO expounds on the news). After, survivors have 1:1 conversations with thier manager.

If you don’t have regular all-hands or frequent interactions with the CEO, this option is likely ideal. If it’s uncommon for employees to hear directly from the CEO you might consider having someone else in leadership speak, such as a GM or site director. The CEO should still be present and take full responsibility.

No right or wrong

Different companies have used different scenarios. All have done well. Regardless of what scenario you select; an efficient execution of your run-sheet, a well prepared team, and empathic communications - is way more important than the ordering of events.

Companies that are unprepared are more likely to run into issues.

All-company meeting talking points

First, take accountability.  

Admit what went wrong. Messaging should be owned by the CEO. This is where trust and confidence is built or broken.

Provide transparency

Communicate the process the organization underwent in deciding to implement the layoff and the process used to decide which jobs would be eliminated. Transparency is essential.

Employees are triggered by a sense of fairness. Explaining the procedures followed will help reduce those triggers and can also minimize the likelihood of potential legal issues.

Share the plan forward

Outline and reiterate the plan forward including the new organizational structure. This shows the conviction that the layoff was not for nothing and is meant to reassure those who’ve believed in and have worked hard for the company’s vision.

Provide assurance

If possible, assure that all measures have been taken to ensure this happens once and without more rounds of layoffs in the near future.

You don’t want your people to have a lingering fear that more people are going to be laid off.

Allow for questions

Then, allow employees to speak either in a Q&A as a company or in small groups with the management team.

Allow employees to express how they feel about the situation.

Media response planning

There are measures that can help control the message outside of your company’s walls.

Get ahead of any leak or review on Glassdoor by having your PR team prepare a press release that can be sent as the All-Hands is underway.

You can also work with your CEO to prepare a more personalized blog post. These techniques are signals that you aren’t hiding from the news.

Some companies also decide not to announce layoffs - but if you don’t announce the layoffs and you get inquiries, be prepared. Don’t stay quiet if for some reason an angry former employee talks to the media.

General best practices

After Layoff

Just as preparation for a layoff begins long before it might happen, there are important steps to take after those who are laid off leave. The most important thing to do is to increase communication. People want to know what’s going on so that assumptions and rumors don’t make things worse.

Ask for feedback

Once employee emotions have tempered after the layoff, they should have the opportunity to express their opinion and emotions regarding the decision and how it was handled. This feedback can be useful in case of future layoffs.

You can hold small group sessions with the CEO or Senior Leadership team to ask employees 1) Is it clear why this happened? 2) Do you have any questions about our new plan? 3) Is there anything we could’ve done better?”

Slowly go back to normal

Give people time to grieve but, after that, quickly orient the company to the future. Don’t pretend it never happened, but focus on what’s next. Celebrate the contributions of the people who left and those who are still there. Host a happy hour or lunch. Reintroduce some of the routines that bring back a sense of normalcy to the office.

Support employees staying

One of the most critical times for employee engagement is right after a big change. Reinforce your support, appreciation and gratitude for those that are staying, layout a roadmap for the future of the business and make sure they know they are a part of that future.

Keep an open dialogue with employees on how the changes will affect their role and workload and if there is the possibility of office relocation or a re-org of their team. Ongoing communications will help calm concerns and answer on-going questions employees are likely to have.

Ensure leadership is visible and accessible

Leadership may want to retreat, turn off the phones, stop answering emails, and avoid everyone. This would be the worst action to take.

This is the time for them to be as visible as possible.

Employees need to see leadership offline or online and talk to them and be able to seek out their help and advice. Leaders may need to put on a brave face but that’s ok!

Leadership should share the pain too

Turn in the company car. Reassign your personal assistant to a revenue-generating position. Fly coach. Stay in motels. Sell the box tickets to the football game.

Do something, even if it is symbolic.

Credits: Photo by @ckinwai on Unsplash.