Laying Off Employees: The Main Criteria

Introduction

Laying off employees is an effective cost reduction strategy; however, there are many cores to consider before making such a decision. When management chooses this strategy, it is necessary to make sure that the policy does not affect underprotected classes: people over 40 and ethical minorities. Among the possible criteria by which to determine employees to lay off are performance, salary levels, necessary skills for future advancement, projects and temporary employees (Spinello, 2019). The manager may additionally consider early retirement and staff reduction based on location.

Performance

Pros

• Performance evaluating is one of the simplest and most easily achievable factors in layoffs
• The strategy creates possibility to leave in the company employees who excel, have a flexible skill set, and adapt to changes (Wilkinson & Redman, 2021).
• The company can become better by retaining the most valuable staff

Cons

• The strategy may affect vulnerable employees who may find it difficult to perform well due to their age
• Performance cannot be the only criteria for layoffs

Time in Job

Pros

• It is easier for a company to fire a novice than one who has shown loyalty for many years from the moral perspective
• The strategy allows maintaining stability

Cons

• When the company fire newcomers, it may miss the chance to allow them to show their professional qualities
• Older employees can show much worse results of work

Salary

Pros

• Lay off based on salary is one of the most financially affective strategies
• The strategy makes it possible to reduce the least number of personnel with high financial efficiency due to the salary differences

Cons

• The strategy does not take into account the factor by which a person receives a larger salary
• The method is fraught with the dismissal of high-performing employees

Skillset Needed Going Forward

Pros

• The strategy allows the organization to determine what it needs and adapt the staff as much as possible to the intended goals and objectives
• The company will work more efficiently

Cons

• This strategy does nothing to protect vulnerable employees
• The method may be perceived as discriminatory

Project Position Eliminated

Pros

• Reducing staff will make a significant contribution to increasing efficiency at a lower cost (Mujtaba & Senathip, 2020)
• The company has a possibility to get rid of unnecessary projects that waste resources

Cons

• Laying off entire project departments is a lot of stress for employees
• The strategy does not take into account which people with what background and skills worked in the reduced department

Temporary Headcount

Pros

• For temporary employees, being fired will not be such a big stress, since they initially knew that they would not stay long in this job (Plomp et al., 2019)
• This decision is fast and financial results will be visible quickly
• Temporary employees are usually not a dense part of the team, which is difficult to refuse

Cons

• It is necessary to understand why the company needed to hire temporary employees
• The need to hire temporary employees has arisen to close critical gaps in work
• Such a strategy will result in the need for new employees to close these same gaps

Early Retirement

Pros

• Early retirement is a strategy, that protects vulnerable employees, who are older 40
• This strategy greatly benefits staff who are already contemplating retirement due to age and health conditions
• This method benefits the community by reducing the risks of premature deterioration in the health of workers and allowing them to live longer (Wilson et al., 2020)

Cons

• Employees will be offered earlier retirement, medical coverage and decent maintenance, which requires significant resources (Stern & Weidenstedt, 2022).
• The strategy is very costly, the company may not have the finances to apply the strategy on a large scale
• The result may appear only a long time later, the strategy will not work if the company needs quick solutions

Staff Reduction Based on Location

Pros

• Location based strategy is an option that provides a quick financial solution
• This is a simple method that is easy to implement, because the principle of dismissal based on location can be carried out on performance indicators
• The company can get rid of a division that does not generate income

Cons

• The reduction of an entire branch at the location is a severe stress for employees
• The strategy does not take into account the vulnerable population
• The reduced department could later show its effectiveness

Conclusion

The decision to lay off employees cannot be easy and has serious financial implications. None of the strategies is unambiguously winning, so Yan is encouraged to use a combination of them to make the decision as painless as possible. Firstly, Yan can offer employees early retirement: this strategy will protect employees but may be too costly for the company. It is necessary to reduce the number of employees based on the performance criterion in order to make the team smaller but more efficient. Wage-based cuts will be effective, if the management understands the reasons why some employees have higher salaries than others.

References

Mujtaba, B. G., & Senathip, T. (2020). Layoffs and downsizing implications for the leadership role of human resources. Journal of Service Science and Management, 13(2), 209-224.

Plomp, J., Tims, M., Khapova, S. N., Jansen, P. G., & Bakker, A. B. (2019). Psychological safety, job crafting, and employability: A comparison between permanent and temporary workers. Frontiers in psychology, 10(1), 974-991.

Spinello, R. A. (2019). Business ethics: Contemporary issues and cases. United States: SAGE Publications.

Stern, C., & Weidenstedt, L. (2022). Managers on balancing employment protection and what’s good for the company: Intended and unintended consequences of a semi-coercive institution. Economic and Industrial Democracy, 43(3), 1281-1304.

Wilkinson, A., & Redman, T. (eds.). (2021). Contemporary human resource management: Text and cases. United Kingdom: SAGE Publications.

Wilson, D. M., Errasti‐Ibarrondo, B., Low, G., O’Reilly, P., Murphy, F., Fahy, A., & Murphy, J. (2020). Identifying contemporary early retirement factors and strategies to encourage and enable longer working lives: A scoping review. International journal of older people nursing, 15(3), 123-135.