Firing Employees vs. Laying Them Off: Making the Difficult Decisions
This article was updated on Sept. 5, 2018.
In the movies, firing employees is done quickly and confidently. The employee does something terrible, the boss screams, "You're fired!" and that's that. Alternatively, the boss is a horrible person who fires a completely innocent employee. The real world, of course, isn't like that. The decision to fire someone often comes with substantial anxiety and consideration.
Firing employees who deserve to be fired is hard enough, but what about laying off an employee? In what situations should you choose one option over another?
Involuntary terminations may occur when an employee commits misconduct or exhibits poor performance. Gross misconduct could include stealing, violent behavior, sexual harassment or anything else that violates the law or company policy.
Termination decisions may often be clear, but are not always easy. The last thing you want is an employee who embezzles from you. If your former employee attempts to apply for unemployment insurance, some states allow you to contest the application.
Other instances where termination may be necessary aren't so obvious. Let's say you have an employee who is a good person but not a strong performer. You can't afford to keep paying someone who isn't contributing to your business. Employees who lose their jobs for no fault of their own are generally entitled to receive unemployment benefits, however state law governs eligibility requirements.
Laying Off Workers
Another type of involuntary termination includes separation resulting from a layoff. If your company is experiencing financial issues or pursuing a different strategic path, employees should be laid off, not fired. Keep in mind that the federal Worker Adjustment and Retraining Notification Act, also known as the WARN Act, requires notification of plant closings and mass layoffs at least 60 days in advance for companies with 100 or more employees. Your state government may have more strict notification requirements.
If possible, you may want to offer severance to the laid-off employee, not oppose unemployment and help with the job search by providing positive references. If the possibility for rehire if circumstances change is open, you may want to let the employee know, but take care to avoid making promises you cannot keep. Never forget that a layoff is typically not the fault of the employee.
One hidden cost of firing is finding a replacement. While some low-level jobs can be filled quickly with minimal training, finding, hiring and training employees for high-level jobs can take weeks or months. For example, firing an employee who earns $50,000 could the cost of hiring a new employee could reach $25,000. Understanding these costs may prompt you to work with your current employee to fix whatever the problem is rather than firing him or her.
Any time you fire or lay a worker off, you also run the risk of being sued if the employee believes that their termination was not justified. Defending a lawsuit can be expensive, so you may want to check with an employment lawyer to make sure you're complying with the law prior to having the termination discussion.
Regardless of whether you are firing someone or laying them off, you need to do so with sensitivity and awareness that your decision will likely have a huge impact on that person's life. Always conduct the process with consideration and provide severance whenever practical.