Making the decision to lay off employees is never easy. As a business owner or HR leader, you face tough choices that affect real people and their families. While layoffs are sometimes necessary, how you handle them can make a big difference for everyone involved, including your business.
Layoffs, Terminations, and Furloughs: What’s the Difference?
Before we go further, it’s important to understand the difference between a layoff, a termination, and a furlough—terms that are often confused but carry very different implications for your business and your employees.
- Layoff: This happens for business-related reasons like falling revenue, loss of major clients, company restructuring, budget cuts, or industry changes that impact demand. It’s not tied to employee performance. Layoffs may be temporary or permanent, but rehiring must be approached with caution. Bringing someone new into a similar role too soon can raise legal red flags, making it appear that the layoff wasn’t legitimate.
- Termination: This is typically due to an employee’s behavior, performance, or conduct. It’s a permanent separation initiated by the employer for cause or due to policy violations.
- Furlough: A furlough is a temporary, unpaid leave of absence. The employee is still technically employed but is not working or being paid for a defined period. Employers often use furloughs during seasonal slowdowns or financial uncertainty, with the intention of bringing staff back once conditions improve.
Why We’re Focusing on Layoffs
This blog focuses on layoffs because they involve not just difficult decisions, but also serious compliance considerations, especially when they affect multiple employees. Unlike terminations or furloughs, large-scale layoffs often trigger state and federal notice laws—like the federal WARN Act, which requires certain employers to provide 60 days’ written notice before mass layoffs. Many states have their own “mini-WARN” laws with even stricter rules, sometimes applying to companies with as few as 25 employees.
For example, imagine a company lays off 40 employees due to a sudden drop in business, but fails to provide the proper WARN notice. If the WARN Act applies, and the employer didn’t meet the notice requirement, they could be liable for back pay, benefits, and penalties for each affected employee. That adds up quickly and can result in costly lawsuits and public scrutiny.
Even beyond notice requirements, compliance issues can arise if the layoff process unintentionally targets a protected group such as older workers, people with disabilities, or individuals on leave. A layoff that disproportionately affects a particular demographic can open the door to discrimination claims, even if the decisions weren’t made with bias in mind.
Handling layoffs the right way can help protect your company’s reputation, preserve employee morale, and minimize the risk of legal fallout during an already stressful time.
Communicating Layoffs with Compassion
How you deliver layoff news matters—a lot. It affects both the people who are leaving and the ones who stay. Whenever possible, talk to impacted employees one-on-one. Avoid announcing layoffs by email or in large meetings. A private conversation shows respect and gives each person space to ask questions. Be honest about the business reasons behind the layoffs. Don’t focus on individual performance. Instead, let employees know what support you’re offering, such as severance pay, extended health benefits, or help finding a new job.
A Look at Two Real-Life Layoff Approaches
When Airbnb had to lay off employees, CEO Brian Chesky sent a clear and thoughtful message to staff. He explained why the layoffs were happening, shared details about the process, and let employees know what support they would receive. He also told both the people leaving and the ones staying what to expect next. Because of this clear and caring communication, Airbnb was able to keep the trust of its employees and protect its reputation during a tough time.
In contrast, Twitter’s layoffs under Elon Musk in November 2022 were much more confusing and upsetting. Employees were told by email to stay home on a Friday and wait to find out if they still had a job. Many people only realized they had been let go when they were locked out of company systems and email accounts with no warning. The process felt rushed and unorganized. It led to lawsuits and a lot of negative attention.
The long-term effects were also different. Airbnb’s approach kept people’s respect and helped the company stay connected with former employees. Twitter’s actions hurt employee morale, led to legal trouble, and damaged its reputation with both workers and advertisers.
What Happens After Layoffs?
Your job isn’t over once the layoffs are done. The employees who remain may feel anxious or worried about their future. They might also be expected to take on extra work.
Be open about why the layoffs were necessary, what changes are happening, and how you plan to move forward. Clear communication helps keep morale up and shows your team they can trust you.
Confidently Navigate Layoffs with Commonwealth Payroll & HR
How you manage a layoff impacts your team, your operations, and your reputation. At Commonwealth Payroll & HR, we help employers approach layoffs with the right balance of compliance, clarity, and consistency. From drafting notices to planning next steps and communicating with employees, our team provides practical, human support every step of the way. Contact us to get expert guidance when you need it most.
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