5 Steps for Handling Layoffs

October, 2008

For small-business owners, weathering a recession sometimes means having to layoff employees. While staff reductions are never easy, there are a few things business owners can do to maintain productivity levels, avoid legal consequences and soften the blow to the employee.


Chances are it was bad timing, and not bad workers, that resulted in layoffs. Thus, you’ve got to do what you can to assist people in the transition. “There are a lot of state and local agencies geared toward helping people with resume writing, job placement and counseling,” says Dennis Higashiguchi, manager of Consulting Services for N&K CPAs Inc. “Point employees in the right direction by providing relevant contact information.”


“It’s important that the perception be that if there are going to have to be layoffs, upper management is taking a hit as well,” says Higashiguchi. This doesn’t mean you go down with the ship – but every little gesture goes a long way. Downsize your office. Take a temporary pay cut. And by all means, resist the temptation to upgrade your iPhone.


Layoffs breed fear. Be honest with your remaining employees, and keep them in the loop. “Trying to hedge doesn’t make sense. The best thing you can do is tell the truth,” explains Higashiguchi. “Let the remaining employees know what the company’s future plans are, what’s being done to deal with the economic times as you move forward, and what the employee can do to assist in the process. They will appreciate you for it, and will be more productive employees.”


Deciding how long to give the employee to vacate the premises is tricky. On the one hand, the longer you can give the individual, the more of a cushion you’re providing him. On the other hand, once an employee knows he’s being terminated, he disengages. Higashiguchi says: “As heartless as it sounds, most times you have to do it very quickly to mitigate those sorts of morale, productivity and security issues.”


The last thing you want is people hearing about layoffs through office gossip before you’ve had a chance to announce them. “Make sure you’re in front of the gossip grapevine from the very beginning,” says Higashiguchi. “It’s important to stay in touch with the informal leaders in the company, because they’re the ones employees are going to look to, and try to glean information from.”

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Jacy L. Youn