Key Steps When Laying Off Employees

When you’re looking at layoffs as an option, whether because of economic woes, a business sale or reconfiguration, there are steps that need to be taken to ensure that it goes smoothly.

Here are key action items that can help you ensure a smooth transition, compiled with the help of Keith Jennings, an Arizona-based HR specialist with Insperity.


Ask yourself your reasons for the layoff. Usually it’s for financial reasons, but make sure you are clear about them.

Break it down.

Decide how you are going to lay off by department. You might decide to lay off one person from each department, or it may be an entire unit.

The criteria.

Now, you need to establish how you will target the people to be laid off. Three common reasons employers will select an employee include tenure, performance or skill set. Tenure (last hired, first fired) is very defendable, while performance can be shakier, because you have to have documented performance issues. In the case of skill sets, you have to be clear about the job duties and whether the current employee can perform those tasks. For example, you may be combining two financial positions, and the current employee does not have one of the skills you’ve identified as critical.


Look at who you’ve chosen. Are the affected workers mostly African-Americans, workers 40 and older, or any other protected category? While you may still decide to choose those people for the layoff, you’ll want to make sure you have measurable criteria (like cost of pay as criteria may tend to target the older worker).

The details.

Assess whether you need some staff to remain for a set period of time to tie up loose ends (finish jobs, transfer of duties in a sale, etc.) Then, work out who you need, for how long, and how you want to compensate. You can offer to pay a bonus or give a severance package to those who agree to stay.

Workers 40 and older.

It’s worth your while to consider having age discrimination waivers, however, you probably don’t want to go there unless you plan to compensate them in addition to what they are due (benefits, salary, etc.) The reason? Although it’s rare, you could open up questions about whether they should file a suit against you.

The packet.

Prepare an exit packet for each employee.

What needs to be in the packet:


You want to prepare packets for outgoing employees that explains COBRA and what they need to do to continue receiving their benefits.


Provide contacts to the local unemployment agency.


Include confirmation of employment, including dates of employment and titles.


Include information on their 401(k) package.


You may want to include a release for them to sign of all claims, especially if severance or separation pay is given.

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