Layoff Definition
A layoff refers to the situation when a company temporarily or permanently terminates an employee for reasons unrelated to his or her performance. Employers certainly lay off employees to cut costs, during economic crises or seasonal closures.
It is no news that the business landscape has lately become uncertain wherein employers are left with no other option but to lay off employees; even their favourite ones. The question here is why are employers choosing this option, and how does it actually send ripple effects through their companies?
If you too have these questions in your mind, you have just landed at the right place.
Here, we will explore everything about layoff, from its meaning and consequences to some recent examples of mass layoffs.
Let’s learn:
- Understanding Layoff Definition
- Examples of Mass Layoffs in 2023
- 5 Reasons Why Companies Lay Off Employees
- FAQs
Understanding Layoff Definition
Layoff, also known as downsizing, smart sizing, and right-sizing, has become a go-to option for companies when it comes to cost-cutting. It is a strategic step taken to optimize their processes or address any unprecedented issues related to a business.
Given that this term is so popular at present, it is the first thing that comes to every employer’s mind when they face an economic downturn.
Layoffs do not discriminate; they can strike a single employee or a group of employees alike. In simpler words, no working individual in today’s time is immune to this hard reality.
According to CIEL HR, almost 70 startups have collectively laid off over 17000 employees, in the first half of 2023.
Examples of Mass Layoffs in 2023
There are literally many but here are the top three companies that were in the headlines for their mass layoff in 2023:
Early this year, Alphabet, the parent company of Google, issued a memorandum that stated that approximately 12,000 employees would face layoffs. Following this shocking announcement written by Sundar Pichai, the chief executive of Google, employees in London offices even organized a walkout in April.
On January 18, 2023, Satya Nadella, the CEO of Microsoft, conveyed in a company-wide memo that due to some significant changes in the organizational structure, they will be cutting down 10,000 jobs by the end of March 2023.
On October 16, LinkedIn made an unfortunate announcement of laying off 668 employees from its core departments including engineering, talent, and finance. This was their second wave of layoffs this year and they attributed this step to a decline in revenue growth.
This downsizing will impact more than 3 percent of its workforce, which totals 20,000 employees, reflecting the broader trend of substantial job reductions within the tech industry.
Curious to know the exact reasons for these ongoing mass layoffs? Even we’re! Let’s find them in the next section.
5 Reasons Why Companies Lay Off Employees
Here are five more reasons, other than cost deduction and economic downturn, why employers consider laying off employees:
Workforce needs change in no time. In such a scenario, organizations often find themselves with surplus employees in certain roles or departments. This, in turn, results in redundancy. To ensure productivity and competitiveness, employers today are making the tough decision to temporarily or permanently terminate employees whose positions seem redundant.
Outsourcing is nowadays considered a smart way to tap into specialized skills at a bare minimum operational cost. Due to this very reason, most employers are taking a step ahead to lay off their in-house employees whose duties can be easily outsourced to external companies or experts at half the price.
While outsourcing saves substantial money for companies, it wreaks havoc on the lives of the employees involved.
Technology has become the cornerstone and it is here to stay and advance. This means organizations have no other choice but to adapt the latest technologies to stay ahead of the curve.
However, this will eventually lead to a time when employees with outdated skill sets will no longer be considered. As a result, employers may terminate them to build a more modern, tech-savvy workforce that can navigate the digital landscape effortlessly.
Every company, be it small or large, is bound to shift according to changing dynamics in the market, which eventually leads to restructuring job roles or creating new positions. To realign their workforce with these evolving demands, employers terminate people who no longer fit the newly defined job profiles.
Some industries such as retail, agriculture, and tourism experience dramatic fluctuations in demand depending on seasons or market cycles.
To address this issue, such companies follow seasonal layoffs. It, simply means, hiring additional workers during peak periods and terminating some of them during off-peak seasons.
There you go! So, what exactly is layoff?
It is just a strategic step taken by employers to cut costs and sail through difficult times.
While layoff has become a common cost-saving option, we believe it should be the last resort as laying off employees may also have several long-term consequences for both employees and the company itself. Keeping the same in mind, you can explore other options such as salary deferment, furloughs, or even reducing employees’ work hours.
If nothing works, you can consider terminating the least-performing employees. To get real-time insights and compare employees’ performance with utmost fairness, rely on HROne today!
Remember, laying off employees is easy but it takes a real leader to navigate hard situations with empathy towards employees with smart solutions.
FAQs
- Why layoffs are happening?
Layoffs in India and other countries are happening due to multiple reasons like economic crises, organizational restructuring, or financial challenges. Companies are addressing these challenges by lowering their headcounts.
- What is layoff in HRM?
Layoff in HRM typically means to terminate an employee on a temporary or permanent basis to solve an ongoing business challenge. Layoff is different from resignation or firing and happens anytime depending on several circumstances.
- How do layoffs affect the economy?
Laying off employees usually affects an economy both directly and indirectly. Directly, it contributes to increased unemployment rates and decreased consumer spending, resulting in an economic downturn. Indirectly, mass layoffs reduce consumers’ confidence which can not just impact industries but also cause a ripple effect in the economy, with consequences for businesses, financial markets, and government policies.