December 5, 2022

small business advice

The Right Way to Lay Off Workers

Jerry Osteryoung | 6/29/2009

If there is a problem that I have seen over and over lately it is how to lay off a worker for no fault of their own. Having to terminate an employee who has a family and has done nothing wrong is so tough, but still must be done.
It is so important as you go through any layoff process to check with an HR professional or an HR attorney to make sure that you are doing things legally. There are many laws out there so you really need to verify that you are following the law in all layoffs.

We were working with a firm who kept on trying to keep their 100 employee workforce employed for as long as possible. However, sales were continuing to fall and they had reached their maximum line of credit so they had to take some action even though they really did not want to. After a difficult meeting, they decided that the only way to survive was to reduce their labor force to ½ or lay off 50 workers. They just hated to do this as they knew how much damage this would do to the employees and they also knew that their decision would affect their ability to provide services and products once things turned around. They understood that survivability now meant lower profits in the future but that there would be a future.

When or if you have to lay off a worker or workers then there are three important rules to this difficult process. First as you talk to worker you need to be compassionate as you can be. Expressing your appreciation for their contribution to the business is so important and to tell them.

For most employees there is a shock both for being laid off and how they are going to manage going forward. The more help and sensitivity to these issues the better. I have seen many firms employ an outplacement service to help their staff find new jobs and counseling as well.

The second rule is to take necessary actions to protect the company and its assets from upset employees. Of course, most employees are going to be upset but there are going to be those few that will want to take out there anger on the assets of the company. Computer passwords should be changed as the employee is coming in for the layoff and then no matter what, the employee needs to be escorted their desk and then out of the building. There just should not be anyone who is exempt from this escort process.

Finally, after all of the employees have been terminated you need to have a meeting with the remaining staff to explain both what has been done as well as why you did the lay-offs. As part of this meeting you need to tell them how important they are to the business and by working together, how successful you will be. It is also good to tell them what you plan to do to maintain the health and viability of the business going forward so they have confidence in you and the business.

Now if you have to lay off workers go out and make sure that you have a process in place following these three rules. These rules are going to make this difficult process as tolerable as possible.

Jerry Osteryoung is the Director of Outreach of the Jim Moran Institute for Global Entrepreneurship in the College of Business at Florida State University, the Jim Moran Professor of Entrepreneurship; and Professor of Finance. He was the founding Executive Director of the Jim Moran Institute and served in that position from 1995 through 2008. He can be reached by e-mail at or by phone at 850-644-3372.

Tags: Florida Small Business

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