Termination

Purpose of Process (see below how HRSource™ can help):

Layoffs are harmful to an organization for several reasons:

• Lower employee morale (voluntary turnover often increases after a layoff because of job insecurity, anger at the organization, or a perception that the wrong people were laid off)
• Cost of severance pay and benefits (optional, but one week of severance for each year of service is common)
• Negative public relations exposure and community relations impact
• Permanent loss of skilled employees
• Increased risk of wrongful termination lawsuits

Nonetheless layoffs may be necessary if the business base is not large enough to support the current number of employees. This process outlines how to conduct a layoff in a way that minimizes the above costs.

Recommended Steps in the Process:

1. If the business situation is expected to recover quickly, investigate alternatives to a layoff:
   • Temporary plant shutdown (one to two weeks, in conjunction with a holiday, if possible)
   • Worksharing program in which employees alternate days off (some states, such as California, offer programs that coordinate pay with unemployment)
   • Lower variable pay expenses (e.g. profit sharing) may satisfy cost reduction needs. (See also the Variable Pay process)
     
     
2. If the alternatives to a layoff are not sufficient, then proceed with the layoff planning. Develop a schedule. Make the schedule short to minimize the rumor period. Determine if severance packages will be provided (typically one week's pay and continued benefit coverage for each year of service up to a maximum of 15 weeks)
   
   
3. Determine what skills or functions are essential throughout the organization. Document how this determination was made.
   
   
4. Identify which jobs and job families must be reduced.
   
   
5. Compare all employees in the jobs which are subject to layoff. The comparison can be made within each department or company-wide. Use the following as a basis of comparison (see sample Employee Profile matrix):
   • Skills
   • Education
   • Years of experience
   • Years of service
   • Years in the position
   • Recent performance reviews
   • Bonuses received in the past three years
     
     
6. Select the candidates for layoff, using the objective criteria listed above, and applied in a consistent fashion.
   
   
7. Analyze the population selected for layoff. Calculate the percentage of females, minorities, and employees over age 40 in each of the affected jobs or job families before the layoff. Compare this to the percentage of females, minorities, and employees over age 40 in the population selected for the layoff. If the percentage of any of those protected groups being laid off is significantly higher than their pre-layoff percentage of population, then go back to the previous step and review the selection process.
   • If there were errors in the selection process, correct the errors.
   • If the selection process was sound and is objectively documented and defensible, continue with the process.
   • If the selection process appears sound, but is poorly documented and/or difficult to defend, consider offering releases to some protected group members (see the Release process)
     
     
8. Arrange outplacement counseling, if possible.
   
   
9. Have the manager notify each employee separately of their layoff.
   • It may be advantageous to have two people (the immediate manager and Human Resources) notify the employee of the layoff, for support and collaboration of what was communicated.
   • If there's a risk of a physical reaction by the employee being laid off, alert security to be prepared. Security should maintain a low profile.
   • Avoid debating the merits of the termination. Be courteous and firm. Acknowledge disagreement and state that the decision to terminate their employment has been made by the company and is final. Keep answers to questions short. Allow 10 minutes for the meeting.
   • It's preferable to communicate the termination decision early in the shift and early in the week. Pay the employee through the end of the week to allow time for Payroll and Human Resources to process all the terminations.
   • Provide the employee with information on Employee Assistance Plan (EAP), if available, Outplacement Counseling, if available, and Notification of state unemployment.
     
     
10. Be prepared to answer the following questions:
    • When should I leave? A: You may leave now
    • What about the project I'm working on? A: Your manager will handle it.
    • When can I clean out my desk? A: Now
    • Can I return tonight or this weekend to clean out my desk? A: It's desirable to allow the employee to avoid the embarrassment of cleaning out the desk in front of co-workers, but if you allow after-hours access, arrange to have the manager present.
    • Whose decision was it to lay me off? A: The decision was made by your management with concurrence from Human Resources.
    • Can I continue to use my voicemail? A: Your voicemail will be turned off at the end of the last day of salary continuance.
      
      
11. Determine if the employee has company property, computer passwords, or security clearances.
    
    
12. Obtain the final paycheck from payroll.
    
    
13. Cancel passwords or clearances as appropriate.
    
    
14. Prepare termination paperwork:
    • Mandated state notifications (see example for state of California)
    • COBRA Election form
    • Certificate of Group Health Coverage form
    • Health insurance conversion
    • Retirement plan (401(k)) information, including vesting, rollover options, and outstanding 401(k) loans (see Selecting and Administering a 401(k) Plan process).
      
      
15. Have the employee come to work at a prearranged time at the end of the week to receive their final paycheck and termination paperwork.
    
    
16. Inform others in the work group, as to which employees were affected by the layoff. Do not discuss the details of how certain people were selected. Reassure remaining employees relative to staffing plans and work assignments.

Process Tips:

Try to maintain positive relations with the employees affected by the layoff. Be supportive. How the laid off employees are treated will get back to the employees who remain and will affect their attitude toward the company. Also, within a few months, due to inevitable shortfalls in staffing planning, the company will want to rehire some of those just laid off. They may return to the company if they were treated well during the layoff.

How HRSource™ Can Help:

Use HRSource™ to document the particulars of the layoff. HRSource™ can document who was laid off, when, and why (justification).  The Documents module can link to any documents related to the layoff.  HRSource™ can generate reports for analyzing the impact of the layoff on protected group members.