When an organization goes through a downsizing, HR professionals need to manage many big and small details, all while treating laid-off employees with dignity and compassion and communicating positively with retained employees. Creating a reduction in force template well before a layoff event can help make the process go as smoothly as possible. A reduction in force template outlines policies and timelines to follow, so that should your organization ever need to conduct a layoff, you’re well prepared to manage the event.
Follow these steps to create and use a reduction in force template.
How to create a reduction in force template
1. Establish a timeline
Since a number of federal, state, and local laws govern reductions in force, it is important to have a timeline to follow so you don’t run afoul of legal requirements. The Worker Adjustment and Retraining Notification (WARN) Act, for example, requires companies with 100 or more full-time employees to give written notice 60 days before the date of a mass layoff. Some states require an even earlier warning, and some unions also stipulate advance notice. CareerArc’s Reduction In Force Checklist, which outlines the 16 steps to successfully managing a layoff, can serve as a helpful guide for developing a timeline to make sure all necessary actions are taken in the appropriate moment.
2. Develop an employee selection strategy
Take the time to decide what criteria you will use to determine who will be laid off during a reduction in force. Of course, each individual reduction in force is different, so you’ll likely need to tweak your criteria for specific circumstances. Still, having a general agreed-upon guideline in place will allow your organization to create a layoff list more quickly. Make sure your employee selection strategy allows you to retain your best talent while applying fair standards across the organization.
3. Draft a reduction in force letter
Create a template reduction in force letter—also known as an employee termination letter—that you can adapt for affected employees. In general, these letters state the terms of the termination for both the employee and the employer. The employee generally is asked to sign a release of claims, agreeing not to sue the company, while the employer is expected to provide a severance package. Specifics on what to include in a reduction in force letter are detailed in the next section.
4. Develop a severance policy
Many companies provide severance packages to employees affected by a reduction in force. A severance package typically includes severance pay as well as benefits such as extended health coverage and outplacement services, which are career transition services to help exiting employees find new jobs more quickly and easily.
As Entrepreneur points out, providing severance pay shows “you have some level of regard for [your departing employees] and will not leave them high and dry.” Determine how your organization will calculate severance pay, so you can simply apply that policy should you need to conduct a reduction in force.
5. Decide on an employment termination meeting process
Meeting with affected employees to let them know they no longer have a job is a difficult task. It is also a task that requires you to go over a number of different details, from getting forms signed to collecting key cards. Create a checklist of all the materials you’ll need at a termination meeting so that you don’t forget anything, as well as all the steps to take during the meeting.
How to use a reduction in force template
Once you have created a reduction in force template, conducting a layoff will be a much more streamlined process. Here are the five steps to take if your organization should ever need to go through a reduction in force.
1. Nail down the timeline
Your reduction in force template already details deadlines you need to meet. Now you can put actual dates to each item. It may be easiest to first determine an exact date of the layoff, then work backwards to figure out when to give out written notice to comply with the WARN Act, as well as when to take other key actions.
2. Select employees
Using the reduction in force template, determine which specific employees will be let go as part of the reduction in force. Once you’ve developed a list using non-discriminatory criteria, make sure you evaluate the resulting list to make sure you’re following U.S. Equal Employment Opportunity Commission (EEOC) rules. EEOC notes 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. If your resulting list disproportionately affects one or more protected groups, adjust your list considering “alternative layoff criteria, such as employees’ profitability, productivity or expertise,” as the EEOC recommends.
3. Prepare reduction in force letters
Use the draft reduction in force letter you have to create letters for each individual affected employee. Add in names, dates, dollar amounts, and other details specific to the employee.
4. Prepare severance packages
Following the severance policy outlined in your reduction in force template, determine what each affected employee’s severance package will be, and prepare all materials to give to the employee. For example, you may need to cut checks for severance pay and gather information materials about outplacement services.
5. Plan the employee termination meeting
Decide where and when you will hold the employee termination meeting, preferably a day that will be least disruptive to the business. Train and collaborate with managers who will be part of these meetings to ensure that the event goes smoothly. Go over what you will say during the meeting so you don’t forget any important details.
What to include in a reduction in force letter
A reduction in force letter should include the reason why the reduction in force is taking place, the fact that the addressed employee is being terminated, and details about the severance package and outplacement service.
If the affected employee is over 40 years old, you also need to follow rules specific to the Older Workers Benefit Protection Act (OWBPA), which helps protect these employees from age discrimination. Employees older than 40 must be given at least 21 days to review an offer if they were terminated individually—or 45 days if terminated as part of a larger layoff. They must also be afforded seven additional days after signing to revoke the agreement.
In addition, the release of claims for these older employees should:
- State the release covers age discrimination and specifically mention the Age Discrimination in Employment Act (ADEA)
- State the release does not cover issues that arise after the signing of the severance agreement
- Advise employees to seek the advice of an attorney
What to say when laying off employees
On the day of the reduction in force, it is important to treat employees with dignity. Preparing a script will help ensure that you keep your speech compassionate and kind without saying anything that opens up your organization to a lawsuit. CareerArc’s Layoff Notification Guide provides a sample script you can customize to fit your company’s needs.
In addition, CareerArc’s webinar, Compassionate Offboarding: How to Manage Layoffs with Empathy and Dignity, provides details on best practices for managing a layoff meeting. This resource can help you determine what to say—and not to say—during an offboarding meeting.
CareerArc Outplacement offers unlimited, on-demand, one-on-one career coaching to employees in career transition, in addition to resume reviews, video interview coaching, job search tools, and a suite of other services. Learn more about how CareerArc Outplacement can help you manage your reduction in force.