When organizations go through a restructuring, departments are often merged, whittled down, or eliminated altogether, leading to layoffs. As an HR professional, you play a key part in the layoff process. In addition to taking care of the logistics of layoff meetings and preparing severance packages for affected employees, you also need to help determine how to decide whom to lay off.
Selecting which people to let go from an organization is a very difficult task. No matter how necessary a reduction in force may be for the long-term health of your company, telling colleagues they no longer have a job is often an emotionally fraught process—which makes deciding who will be given this news an equally challenging endeavor.
In addition to the emotional challenges, layoffs present many legal concerns. As you consider how to decide whom to lay off, you need to make sure your selection is conducted in a way that doesn’t inadvertently discriminate against protected groups, opening your company up to wrongful termination lawsuits. The future needs of your organization also require careful consideration. You don’t want your selection process to terminate employees who may be vital to your company after the restructuring.
How to decide whom to lay off requires balancing a number of important concerns, such as retaining key talent, forestalling lawsuits, and ensuring a fair process for all employees. Careful attention to all of those factors will make for a smoother layoff process. Here are some best practices to follow as you determine how to decide whom to layoff during a restructure.
Document the entire process
Even before any decisions are made about how to decide whom to lay off, determine how the process will be documented and begin keeping records of each step. According to IndustryWeek, documentation is key in the layoff selection process, and HR professionals should document the decisions that are made: “Documentation should include the business justification for the RIF, organizational charts before and after the selections, and the individuals selected based on the criteria identified.” Keeping excellent records from the beginning will help reduce your layoff-related legal risks.
Determine your organization’s needs
During a restructuring, your organization’s vision and direction changes, sometimes drastically. Since the needs of your company will change, it is important to consider which positions will be the most important in fulfilling these shifting priorities. Consider which parts of the company are slated for expansion, and which are shrinking or getting eliminated. Keeping these changes in mind will help you figure out how to decide whom to lay off.
Decide on your layoff decision criteria
After figuring out what your organization’s needs will be post-restructure, you will be in a better position to decide which employees should be retained, and which can be let go. It’s important, during a restructure, to make sure you retain your best talent. Forbes advises organizations to “Never allow employees to self-select to be laid off … if you do that, many of your best people may select to be laid off.” Instead, come up with and employ layoff selection criteria that are fair and meet your organization’s future needs.
According to the Society for Human Resource Management (SHRM), organizations can select one of five layoff selection methods:
- Employee status
- Multiple criteria
Each of these methods has advantages and disadvantages. If you use clearly objective criteria, such as seniority or employment status, you reduce the possibility of lawsuits. However, using such criteria might mean letting go of newer employees, part-time workers, or contractors who are vital to the success of your organization. Using multiple criteria can give organizations more flexibility to consider a number of different company needs, but can also create more room for potential wrongful termination lawsuits. Here are the key issues to consider with each of these five methods:
Seniority. Some organizations apply a strict last-hired-first-fired layoff selection policy. Because seniority is a very objective criterion, this selection method lowers the possibility of your company getting sued for unfair layoff practices. In addition, since more senior-level employees also tend to be older, longer-term employees, your organization is unlikely to be accused of age discrimination.
There are, however, also downsides to a last-hired-first-fired layoff selection policy. For example, newer employees may have skills your organization needs to succeed after the restructuring. If this is the case for your company, using seniority as your sole layoff selection criteria may be inadvisable.
Employee status. If your organization has part-time or contingent employees, or employs contractors or freelancers, you might consider letting those workers go and retaining just the full-time employees. This method would help limit litigation, and may also simplify HR paperwork. However, some non full-time employees may nonetheless contribute substantially to the success of your organization. If using employee status as your layoff selection criterion would eliminate key workers you need to continue your organization’s work, you’ll want to use a different selection method.
Merit-based. Among employees that hold similar positions, some often perform at higher levels than others. You may have salespeople who consistently exceed targets, or customer service representatives who are better at retaining customers. A merit-based layoff selection method would allow you to retain these high-performing employees while letting go of those whose records show they are underperforming. If you choose to go with a merit-based method, you need to make sure your company has clear records that document these performance levels so you can forestall lawsuits. Sales numbers, for example, can be used to decide which members of your sales force to retain. If you choose to use performance evaluations that use more subjective criteria, such as taking on additional duties or strong managerial skills, you’ll need to make sure the criteria are consistently applied.
One downside of using a merit-based layoff selection method is that it doesn’t take into account the specific skills that will be valuable to the organization after the restructuring. For example, if your organization plans to automate some customer service functions, high-performing customer service representatives whose skills lay specifically in performing those affected functions may not be as valuable as other representatives whose skills are more adaptable.
Skills-based. BLR advises organizations to “base layoffs on legitimate and objective business needs, not totally or primarily on performance evaluations.” Using skills-based evaluations as your layoff selection criteria can help your organization retain those employees whose skills will be most valuable after the restructuring. Skills-based criteria allow you to assess employees’ potential contributions at an individual level and compare them against the needs of the organization. To this end, Forbes recommends making a list of the most critical goals for each department, then deciding “which people are absolutely essential for reaching your goals” and which people’s “absence will do the least damage.”
A challenge with using skills-based criteria is that some skills are difficult to quantify. There may be employees who have valuable contacts or liaise with important clients, or who are visible cheerleaders and influencers for your company, or who have a long, broad, and deep knowledge of your organization. These qualities may be valuable for your company in the long run, even if these employees’ major skill sets do not directly match up with your company’s immediate needs.
Multiple criteria. Because every major criterion for layoff selection has its pluses and minuses, many companies use multiple criteria to create their layoff selection lists. For example, a company might choose to use a formula to determine layoff selections that gives most weight to skills-based reasons but also takes seniority into account.
The challenge with this method is its added complexity. In addition to having to weigh multiple criteria, you’ll need to come up with a formula for determining the layoff selection list. This will help ensure all criteria you’re using are being applied consistently across the organization. Consistent application is also important from a legal standpoint, should you need to prove your layoff selection method was fair and non-discriminatory.
Create a preliminary layoff list
Once your organization has decided on the criteria, you can apply them in order to draw up a preliminary layoff list. You might apply the layoff selection criteria unilaterally throughout the company, or more specifically to affected departments.
Evaluate the layoff list based on EEOC recommendations
When conducting a layoff, it’s important to keep in mind the federal laws against employment discrimination enforced by the U.S. Equal Employment Opportunity Commission (EEOC). After you’ve drafted a list of employees to lay off based on what you believe you be non-discriminatory criteria, you still need to evaluate the resulting list. As EEOC cautions, you must “determine whether certain groups of employees are affected more than other groups.”
Characteristics protected by federal law are “race, color, religion, sex (including pregnancy, sexual orientation, or gender identity), national origin, disability, age (40 or older) or genetic information (including family medical history),” according to the EEOC. Some states have additional protected classes that may apply to your company. California, for example, also prohibits discrimination based on marital, military, or veteran status or request for family care or pregnancy disability leave, among other criteria. Make sure to check the laws in your state.
Even if you selected employees based on what you felt were neutral criteria like skills-based reasons, you may find that your resulting list disproportionately affects some protected groups. For example, you might find older employees are affected more severely than younger employees. In such a case, the EEOC recommends comparing the ratio of older to younger employees to be laid off to the ratio in your general workforce, with the goal to ensure older employees aren’t disproportionately affected by your plans.
Make tweaks to your layoff selection criteria as necessary
If some protected groups have indeed been disproportionately affected by your layoff selection criteria, it may be necessary to adjust your list. In such a case, the EEOC recommends considering “alternative layoff criteria, such as employees’ profitability, productivity or expertise” that will not disproportionally affect a protected group.
How to decide whom to lay off is not an easy task. Throughout the selection process, you need to work to retain the best talent to benefit your organization’s future and protect the company legally while ensuring a fair and transparent process for employees. Following the general guidelines above will help you with how to decide whom to lay off.
Of course, once you finalize your layoff list, you’ll need to actually conduct layoffs. CareerArc’s layoff notification guide outlines best practices and pointers that benefit all parties during this transition, complete with a pre-notification checklist, tips on how to address emotional reactions and difficult questions from employees, and a sample script that exemplifies the ideal message, tone, and pace of the meeting. In addition, you can watch a webinar on compassionate offboarding to learn about what materials to gather for a layoff notification and how to prepare for the in-person meeting. This webinar also provides information on specific tools and services for supporting both the employee and the brand.
To assist affected employees as they leave your company, consider offering severance packages that include severance pay, continued health benefits, and outplacement service. In addition, make sure to communicate layoffs to your retained employees. These employees will have to make a number of adjustments after your organization’s restructuring, such as moving offices, taking on additional responsibilities, and upskilling to perform new tasks they were not originally hired for. Since the retained employees are the people who will play an invaluable role in the organization’s ongoing success, it’s imperative to take steps to foster this relationship. This will help with getting buy-in on company goals, rebuilding trust, and boosting morale.
CareerArc Outplacement offers unlimited, on-demand, one-on-one career coaching to employees in career transition, along with expert resume reviews, video interview coaching, and a suite of other workshops, tools and services. Learn more about how CareerArc Outplacement can help support your organization during a restructuring.