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Laying off Employees Advantages and Disadvantages

August, 2021

It is evident that no company is immune to financial hardships. There are factors like economic downturn, pandemic, a slowdown in business, decreased productivity, or other issues that force a business to make hard decisions. In these circumstances, companies will go for reducing the labor force and impose employee furloughs and layoffs.

What are Layoffs?

layoff is nothing but terminating or suspending employees from an organization due to a lack of funds or available works. A layoff can be either temporary or permanent based on the financial status of the organization. Layoffs happen for reasons outside employee’s actual work performance. These terminated employees are typically eligible for unemployment, and they will no longer receive any benefits from the company.

For instance, the construction industry often lays off workers during winter due to the climate conditions, hoping to rehire them during spring, but there does not exist a 100% guarantee in this.

Laying off Employees Meaning:

1. Could imply a temporary suspension

Sometimes, laying off employees is for a short period, temporary suspension from work. Employees are suspended for a short term from service, and they expect the company to call them back in time to come. And these employees are called back to work if the organization can stand on its own feet soon enough.

2. Termination of employment

This is a crucial stage when the employees are terminated and will not be called back again. It happens when the company is not able to pull things together again. In this situation, employees have no other option than to seek employment in another company.

Terminating employees is never easy, but desperate situations force companies to adopt desperate decisions.

3. Prior notice

According to the company’s financial stability, prior notice may or may not be given to the employees. Sometimes, sudden incidents may force managers to terminate employees all of a sudden. For seasonal businesses, managers might have a calculation beforehand and might be aware of letting the employees know about this before.

4. It is not the fault of the employees

Most often, layoffs are usually carried when a company lacks funds, lack materials, or works. The employee has nothing to do with the company decision, and it is not based on the performance of the employees.

Advantages of Laying off Employees

1. Only the best employees remain

One of the major advantages of laying off employees based on performance is that only the best employees are retained. The retained employees will be able to make the company to success again. It usually requires excellent efforts to uplift the company from top to bottom. These employees will need to work round the clock to achieve tremendous success.

2. Prompts other employees to pull up their socks

When a company resorts to laying off employees, it will shake all the other employees too. They will realize that any employees who are not putting their complete dedication will be asked to leave. Therefore, this will create a sense of commitment in the employees’ minds, and they will be ready to put all their efforts into the organization’s success.

3. Cost-effective

If a company is facing financial instability, laying off employees is a cost-effective step for the organization. This will make only the dedicated and good working employees stay and terminate the rest

Laying off employees will save the company from sinking and help achieve success with many hard-working hands.

Disadvantages of Laying off Employees

1. Legal problems

Laying off employees should be done with utmost care because the company needs to face many legal procedures if not appropriately handled. This is the major disadvantage of laying off employees. Legal procedures may end up companies paying a considerable sum as a fine. If the company’s situation is already drowning, they may end up facing a lot of troubles.

2. Increases the burden of retaining employees

The retaining employees will be forced to face a workload. A mass layoff often increases the workload of the remaining employees heavily. And this may cause several health issues like heart problems, high blood pressure, etc., which can affect the quality of the work delivered.

Working in a stressful atmosphere makes employees unable to come up with exceptional ideas and thoughts. Eventually, these can affect the bottom line of the organization.

3. Job seeking

The remaining employees will think their company is drowning and their future is also unsafe. They will start seeking a job in other companies rather than working extra hard in this firm. And when a better opportunity knocks, they will surely leave the company.

4. Portrays the company in poor light

Layoffs will negatively impact the company and will affect the reputation. The world outside will know that the company is running out of funds and prevents the clients from investing their share in such a financially unstable company.

5. To sum up

Every organization does lookout for the well-being of its employees. They are forced to adopt furloughing or laying off employees when things become impossible to manage. It is always hard to see a good employee leave the organization. And companies lay off employees with hope and an attempt to get the company back on its feet soon.

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