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A layoff (in British and American English) or retrenchment in (South African English) is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees (collective layoff) for business reasons, such as when certain positions are no longer necessary or when a business slow-down occurs.
Originally, layoff referred exclusively to a temporary interruption in work, but nowadays it can also mean and more commonly means the permanent elimination of a position in both British and US English, requiring the addition of "temporary" to specify the original meaning.
Laid off workers or displaced workers are workers who have lost or left their jobs because their employer has closed or moved, there was insufficient work for them to do, or their position or shift was abolished (Borbely, 2011).
Many synonyms such as downsizing exist, most of which are euphemisms or doublespeak and more abstract descriptions of the process, most of which can also be used for more inclusive processes than that of reducing the number of employees. Downsizing in a company is defined to involve the reduction of employees in a workforce. Downsizing in companies was a popular practice during the 1980s and early 1990s as it was seen as a way to deliver better shareholder value as it helps to reduce costs (downsizing, 2015). Indeed, recent research on downsizing in the U.S., UK, and Japan suggests that downsizing is being regarded by management as one of the preferred routes to turning around declining organisations, cutting costs, and improving organisational performance, most often as a cost-cutting measure.
Euphemisms are often used to "soften the blow" in the process of firing and being fired. The term "layoff" originally meant a temporary interruption in work (and usually pay). The term became a euphemism for permanent termination of employment and now usually means that, requiring the addition of "temporary" to refer to the original meaning. Many other euphemisms have been coined for "(permanent) layoff", including "downsizing", "excess reduction", "rightsizing", "leveraging synergies", "delayering", "smartsizing", "redeployment", "workforce reduction", "workforce optimization", "simplification", "force shaping", "recussion", and "reduction in force" (also called "RIF", especially in the government employment sector).
"Mass layoff" is defined by the United States Department of Labor as 50 or more workers laid off from the same company around the same time. "Attrition" implies that positions will be eliminated as workers quit or retire. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. While "redundancy" is a specific legal term in UK labour law. When an employer is faced with work of a particular type ceasing or diminishing at a particular location, it may be perceived[by whom?] as obfuscation. Firings imply misconduct or failure while layoffs imply economic forces beyond the employer's and employees' control, especially in the face of a recession such as the one that began in the late 2000s.
In (French speaking) Belgium the term Procédure Renault has become a synonym for the consultation process leading to mass redundancies, due to a controversial mass layoff and resultant legislation in the late 1990s.
Common abbreviations for reduction in force
- RIF - A generic reduction in force, of undetermined method. Often pronounced like the word riff rather than spelled out. Sometimes used as a verb, as in "the employees were pretty heavily riffed".
- eRIF – Layoff notice by email.
- IRIF - Involuntary reduction in force - The employee(s) did not voluntarily choose to leave the company. This usually implies that the method of reduction involved either layoffs, firings, or both, but would not usually imply resignations or retirements. If the employee is fired rather than laid off, the term "with cause" may be appended to indicate that the separation was due to this employee's performance and/or behavior, rather than being financially motivated.
- VRIF - Voluntary reduction in force - The employee(s) did play a role in choosing to leave the company, most likely through resignation or retirement. In some instances, a company may exert pressure on an employee to make this choice, perhaps by implying that a layoff or termination would otherwise be imminent, or by offering an attractive severance or early retirement package.
- WFR - Work force reduction.
The risk of being laid off varies depending on the workplace and country a person is working in. Unemployment compensation in any country or workplace is a function which has two main factors. The first factor of unemployment compensation depends on the distribution of unemployment benefits in a workplace. The second factor is the risk of inequality being conditioned upon the political regime type in the country an employee is working in (Wonik, 2010). For example, in Canada, Dorion (1995) states that white-collar workers who have been made redunant receive higher re-employment wages, than those in blue-collar occupations as there job is regarded as being of a higher status than blue collar workers. Where as in France, Margolis (1999, 2002) finds that workers who have been laid off have smaller unemployment periods and higher re-employment earnings in comparison with other unemployed people (Okatenko, 2010). So for workers who have been laid off from their job, the amount of unemployment compensation they receive really depends on the occupation and country they were working in.
The method of separation may have an effect on a former employee's ability to collect whatever form of unemployment compensation might be available in their jurisdiction. In many U.S. states, workers who are laid off can file an unemployment claim and receive compensation. Depending on local or state laws, workers who leave voluntarily are generally ineligible to collect unemployment benefits, as are those who are fired for gross misconduct. Also, lay-offs due to a firm's moving production overseas may entitle one to increased re-training benefits. Some companies in the United States utilize Supplemental Unemployment Benefits (Lihzis, 2016). Since they were first introduced by organized labor and the Department of Labor in the early 1950s, and first issued in a Revenue Ruling by the IRS in 1956, SUB-Pay Plans have enabled employers to supplement the receipt of state unemployment insurance benefits for employees that experience an involuntary layoff. By establishing severance payments as SUB-Pay benefits, the payments are not considered wages for FICA, FUTA, and SUI tax purposes, and employee FICA tax. To qualify for SUB-Pay benefits, the participant must be eligible for state unemployment insurance benefits and the separation benefit must be paid on a periodic basis.
Certain countries (such as Belgium, Netherlands, Portugal, Spain, Italy, France and Germany), distinguish between leaving the company of one's own free will, in which case the person is not entitled to unemployment benefits, but may receive a onetime payment and leaving a company as part of a reduction in labour force size, in which case the person is entitled to them. A RIF reduces the number of positions, rather than laying off specific people, and is usually accompanied by internal redeployment.
A person might leave even if their job is not reduced, even though the employer has strong objections. In this situation, it's more beneficial for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they find new jobs while still being paid by their old companies, costing nothing to the social security system in the end.
There have also been increasing concerns about the organizational effectiveness of the post-downsized ‘anorexic organization’. The benefits, which organizations claim to be seeking from downsizing, centre on savings in labour costs, speedier decision making, better communication, reduced product development time, enhanced involvement of employees and greater responsiveness to customers (De Meuse et al. 1997, p. 168). However, some writers draw attention to the ‘obsessive’ pursuit of downsizing to the point of self-starvation marked by excessive cost cutting, organ failure and an extreme pathological fear of becoming inefficient. Hence ‘trimming’ and ‘tightening belts’ are the order of the day (Tyler and Wilkinson 2007)
Unemployment compensation in Australia
When an employee has been laid off in Australia their employer has to give them redundancy pay, which is also known as severance pay. The only time that a redundancy payment doesn’t have to be paid is if an employee is casual, working for a small business or has worked for a business for less than twelve months. The redundancy compensation payment for employees depends on the length of time an employee has worked for an employer which excludes unpaid leave.
If an employer can’t afford the redundancy payment they are supposed to give their employee, once making them redundant, or they find their employee another job that is suitable for the employee. An employer is able to apply for a reduction in the amount of money they have to pay the employee they have made redundant. An employer can do this by applying to the Fair Work Commission for a redundancy payment reduction (Redundancy - Fair Work Ombudsman, 2016).
- Involuntary termination of employment
- Bureau of Labor Statistics
- Compromise agreement
- Displaced workers
- Severance package
- Termination of employment
- Trade Adjustment Assistance
- Voluntary Redundancy
- WARN Act
- Work sharing
- "layoff noun - definition in British English Dictionary & Thesaurus - Cambridge Dictionary Online". Dictionary.cambridge.org. Retrieved 2012-03-13.
- "Redundancy: your rights". www.gov.uk.
- "Labor force characteristics". Labor Force Statistics from the Current Population Survey. Bureau of Labor Statistics. October 18, 2010. Retrieved 20 October 2010.
- "Glossary". Bureau of Labor Statistics. Retrieved 20 October 2010.
- Baumol, W. J., Blinder, A. S. & Wolff, E. N. (2003). Downsizing in America: Reality, Causes and Consequences. New York: Russell Sage Foundation. See also the American Management Association annual surveys since 1990.
- Sahdev et al. 1999; Chorely 2002; Mason 2002; Rogers 2002
- Mroczkowski, T. and Hanaoka, M. (1997), ‘Effective downsizing strategies in Japan and America: is there a convergence of employment practices?’, Academy of Management Review, Vol.22, No.1, pp. 226–56.
- Ahmakjian and Robinson 2001
- Mellahi, K. and Wilkinson, A. (2004) Downsizing and Innovation Output: A Review of Literature and Research Propositions, BAM Paper 2004, British Academy of Management.
- (Wilkinson 2005, Redman and Wilkinson, 2006)
- "Employers Redundancy procedure, Redundancy Policy, Redundancy compliance". Citation.co.uk. Retrieved 2013-08-01.
- Wonk, Kim (2010). "Unemployment Risks and the Origins of Unemployment Compensation". Studies in Comparative International Development. 45: 57. doi:10.1007/s12116-009-9057-9.
- Okatenko, Anna (1 January 2010). "The Impact of the Reason for Layoff on the Subsequent Unemployment Duration". Annals of Economics and Statistics (99/100): 285–315. doi:10.2307/41219168. JSTOR 41219168.
- "SUB-Pay Plan Legal Precedent". Subpay.com. Retrieved 2012-03-13.
-  Archived June 10, 2011, at the Wayback Machine.
- Ombudsman, Fair Work. "Redundancy pay & entitlements". www.fairwork.gov.au. Retrieved 2016-05-15.
- Karlsson, Tobias (2013). The dynamics of downsizing: the Swedish Tobacco Monopoly in the 1920s. Enterprise & Society, Vol. 14, No. 4, pp. 829-853.
- Krolikowski, Pawel. Job ladders and earnings of displaced workers (Feb. 2015), Center for Economic and Policy Research. "Workers who suffer job displacement experience surprisingly large and persistent earnings losses. However, standard labour market models fail to explain such a phenomenon. This column explains the persistence of workers’ earnings losses by arguing that displaced workers face higher separation probabilities in new jobs, and take substantial time to find their ideal job. The framework also matches empirical findings on the shares of average earnings losses following displacement that are due to reduced employment and lower wages."
- Weinstein, Bruce, "Downsizing 101", BusinessWeek magazine, September 12, 2008.
- Cameron KS. 1(994) Strategies for successful organizational downsizing. Human Resource Management, 33: 477-500.
- Cascio, F.W. (2002) ‘Strategies for responsible restructuring’, Academy of Management Executive, Vol.16, pp. 80–91.
- Redman T and Wilkinson A (2006) Downsizing, in T. Redman and A. Wilkinson(eds), Contemporary Human Resource Management, London: FT/Prentice Hall, pp. 356–381
- Sahdev, K. (2003) ‘Survivors’ reactions to downsizing: the importance Human Resource Management Journal, Vol.13, No.4, pp. 56–74.
- Tyler M and Wilkinson A (2007) The Tyranny of Corporate Slenderness: Understanding Organizations Anorexically, Work, Employment and Society, 21: 537-549.
- Wilkinson, A (2004). Downsizing, rightsizing and dumbsizing: quality, human resources and sustainability - Total Quality Management (PDF). 15 no 8.
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- Labor force characteristics, Bureau of Labor Statistics
- CASE No.: 2001-ERA-19 A case before the U.S. Department of Labor, wherein the terms RIF, IRIF, and VRIF are commonly used.
- APPENDIX D; GLOSSARY OF TERMS A glossary in a U.S. Department of Energy document that includes brief definitions of RIF, IRIF, and VRIF.
- Summary of Reduction in Force Under OPM's Regulations, United States Office of Personnel Management
- UK Redundancy Legal Rights UK specific information on the legal rights of those being made redundant.
- Airline Industry Layoffs - by Patrick Smith
- Job Losses Tracker (UK-based)
- Layoff news and tracker Layoffs news and tracker.
- Rising After Redundancy - RTÉ Ireland TV Series
- Redundancy advice