There are times when you need to conduct layoffs and make new hires at the same time. Here are best practices to follow when doing so.
- The process of laying employees off and making new hires simultaneously needs to be navigated cautiously.
- If you lay an employee off and rehire for the same position within six months, you are opening up your business to potential lawsuits.
- Communicating the "what," "how" and "why" of layoffs, and if simultaneous hires are also underway, is important to the continuity of your business. Employees should never have to guess why these employment actions are being taken, how they are exercised and the timeline involved.
- This article is for small business owners who might need to lay off and hire staff at the same time.
Laying employees off is rarely a pleasant experience. At times, layoffs are necessary for a business to maintain continuity through lean times. However, there are times when you may have to lay off employees while bringing new workers on board at the same time. Before going through this type of staffing conundrum, it is important to understand what you legally can and cannot do and how best to communicate it to your staff.
Is it legal to simultaneously lay off and hire employees?
The short answer is yes, but there are some caveats. What you cannot do is lay off an employee in a specific position and then turn around and fill that same position with a new hire. If that is the route you are looking to take, you cannot refer to that employee termination as a layoff. This could open you up to wrongful termination lawsuits, which can be difficult to defend against.
A company can lay off and hire at the same time when these employment actions do not overlap on the same job or position. You can legally lay off and hire employees simultaneously if you are experiencing a reduction in business and no longer need an operations manager, for example, but do need to bring on more sales professionals in an effort to bring in new business.
How soon can I hire a new employee to replace one I laid off?
The U.S. Department of Labor does not technically identify a time frame for when you can rehire for a laid-off position. However, according to the Society for Human Resource Management, "there are several reasons employers should proceed cautiously when hiring for a position that was recently part of a reduction in force or job elimination."
For example, say you are rehiring for a job within six months of your company reducing, freezing or eliminating that position, and you decide not to rehire the person you laid off from the job. According to the SHRM, "if … the former employee finds out that the new hire or replacement is younger than him or herself (age 40 or under), of a different race, religion, gender, less qualified, etc., it may cast doubt on the legitimacy of the eliminated position in the first place."
This is when former employees may seek legal counsel. The SHRM said that if the employer cannot show why the layoff was necessary and give a clear reason for the decision not to rehire the former employee, the company may find itself in a legal dispute.
To avoid potential legal issues, you are best served waiting at least six months before filling any positions that you have frozen or eliminated – unless you decide to re-employ the person you originally laid off in the same or a similar role.
Key takeaway: Employers can lay off employees and hire new employees simultaneously, as long as they do not use the guise of "layoffs" to terminate poor employees, only to refill those positions right away. A good general rule is to wait at least six months before refilling a position that you laid an employee off from.
What is a layoff?
Before moving forward with layoffs and potential new hires, it is important to understand what a layoff is and how it differs from other forms of employee separations.
Layoffs are generally a reduction in force. This could be just one employee or many employees at one time. Layoffs, which can be temporary or permanent, can occur across multiple departments within a business or just in one.
Performance or behavior issues with employees should not be dealt with by laying them off. Never use the excuse of a layoff to get rid of a troubled employee.
That said, it is common practice in mass layoffs to eliminate the positions of lower-performing employees and those with behavioral issues first. Just understand that you cannot turn around and fill the same position right away with another person.
Many factors can force employers of all sizes to lay off employees.
- Economic downturns: When the entire economy shrinks or slows, companies within many industries have to come up with ways to save money. The fact is that employees are expensive, and if there are ways for a company to go without certain positions, the employees within those positions are removed from the workplace.
- Mergers and acquisitions (M&As): When two companies become one, there are almost always superfluous positions and, thus, employees left in the wake. Determining which ones to retain and which to let go is an inevitable part of M&As.
- Relocating or moving operations: When a business physically moves to a new facility in a distant city or different state, local employees usually won't uproot their lives and move with the company. The lower an employee's pay is, the less likely they are to relocate for the company.
- Evolution, technology and automation: As technology continues to improve, it's inevitable that certain functions employees used to perform are no longer necessary. To limit redundant coverage, employers reduce headcount when it is no longer needed.
- Growing internationally, outsourcing or offshoring: For many reasons, mostly to save money, some employers move their operations overseas, where labor costs are far less than in the U.S. In these situations, entire plants may close down, resulting in thousands of employees being laid off at once.
What is the difference between being fired and laid off?
Employees who lose their job because of performance, attendance or behavioral issues are fired. Their position is not being eliminated; their employment with the company is.
When external realities cause the company to reduce its workforce in order to save money or reduce overhead, that is typically a layoff.
What's the difference between being furloughed and laid off?
There are large differences between being furloughed and being laid off. Much of the time, furloughed workers are still technically employees of the company; they are just removed from the payroll as their work hours are temporarily eliminated (frozen). Most of the time, furloughed workers retain their employment rights, benefits, seniority and status within their position.
Laid-off workers are no longer employees, though, and lose their healthcare and retirement benefits along with their job.
Should layoffs be permanent or temporary?
Layoffs, in and of themselves, should be communicated to the employee as a permanent departure from the company. If circumstances change, you can always contact them and explain your reasons for inviting them back. Never promise future employment to anyone, however, since you cannot predict the future and, more importantly, a verbal promise of employment may be considered a contract for employment in legal circles.
Should I consider rehiring laid-off employees?
According to The Washington Post's poll of workers who were laid off because of COVID-19 earlier this year, 6 in 10 thought it was "very likely" they'd be rehired. How common or feasible this practice will be as economic conditions improve remains to be seen.
Whether or not to rehire laid-off employees is mostly a matter of the employer's judgment. Generally, though, if it's been less than six months from when you laid off an employee to when you need someone in the position again, it is good practice to rehire the same employee. If the laid-off worker was a good employee overall and had a positive experience with your company, there should be no reason not to rehire them if you need that role in your company again.
Key takeaway: Layoffs are when employees are let go from their positions with no promise of getting their job back. Companies choose to lay off employees for reasons other than the workers' performance, such as economic slowdowns, mergers and acquisitions, and business relocations. You can hire back laid-off employees if you need them again, but never use layoffs as a cover for terminating problematic employees.
How to communicate reasons for layoffs and/or simultaneous hiring
There are specific avenues you should take when communicating with the employees you are laying off as well as the rest of the company. Impact Group nicely outlines the three parts of successful communication for managing layoffs:
Communication for exiting employees
Being laid off is never a pleasant experience, and all employers should be mindful, sensitive and patient throughout the process. Anyone in your company who will be delivering the news to laid-off employees needs to know what to include in the notification meeting and how to say it clearly and compassionately.
You, your HR representative or the employee's manager should address these five areas in the notification meeting with the employee:
- Explain the business rationale for the layoffs – and theirs specifically.
- Provide the employee a written letter with all the relevant information, including the effective date and an explanation of the impact on their benefits (e.g., how they will be discontinued).
- Explain the details of their severance package.
- Tell them about any outplacement services that your company or an organization in your area offers.
- Lay out their next steps, such as returning company equipment.
Communication for remaining employees
You and your leadership team should inform the remaining employees that layoffs took place and the reasons behind them. If possible, present this news in person, such as in an all-staff meeting. For large, remote or widely dispersed teams, a video conference can be appropriate.
Follow up the initial announcement with a detailed email to all employees that reinforce what was shared in the meeting. Team leaders, managers and supervisors should also pull their teams together to check in, ask if there are any questions, remind the team to practice self-care, and so on. Survivor's guilt in the wake of layoffs is a real phenomenon that should not be ignored. Managers should acknowledge this and, if your company offers it, remind their team of your employee assistance program (EAP) services.
Impact Group gives these tips for how leaders should communicate with their remaining team members:
- Clearly spell out the layoff processes so employees know what those who are being laid off will be experiencing and what the impact on the team will be.
- Listen to your team's concerns, let them vent, and acknowledge their fears with compassion and authenticity.
- Describe a future vision for employees, their roles, the team and even the whole company.
Communication for customers
You may be embarrassed or reluctant to share this with the public, but your reduction in force could be helpful for customers to know about, particularly if it may impact their service or delivery timing. Provide your managers, sales professionals and any customer-facing staff with scripts on what to say so they are equipped to handle tough conversations.
Key takeaway: Communication through the layoff process is essential to positioning your company and team members for success once the employment actions are complete. Managers should lead with compassion, patience and effective communication for all involved.