Layoff
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A layoff is the termination of employment of an employee or (more commonly) a group of employees for business reasons, such as the decision that certain positions are no longer necessary. Originally the term "layoff" referred specifically to a temporary interruption in work, as when factory work cyclically falls off. However, the term has long been applied also to the permanent elimination of positions as a cost-cutting measure (or for other reasons.)
Further euphemisms are often used to "soften the blow" in the process of firing and being fired, including redundancy, downsize and rightsize, workforce reduction and reduction in force. Mass layoff implies laying off a large number of workers. 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.
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[edit] Reasoning
A layoff is typically driven by one of two forces. In the first case, the goal is to increase a company's profits. Typically the reasoning is that the company will be able to generate the same gross revenues in the future with a smaller number of workers: if the company's revenues do indeed stay constant while labor costs go down, then self-evidently profit will be increased. However, some layoffs occur even when management believes that revenue might actually go down: this usually occurs when there are other firms in the same industry who are performing better, or when a company needs to reduce excess capacity during times of lower volumes. A layoff, or even the suggestion of a layoff, may motivate workers to be more productive. Often, however, rumors of an impending layoff sap productivity as employees who are likely to be affected engage in searching for a new job.
In the second case, downsizing is driven by macroeconomic forces. A company determines that its workers can no longer profitably produce products at current market prices. A company will only employ workers when the per-hour value of their output (marginal productivity of labor) exceeds the cost to employ those workers.
[edit] United States
Throughout the last quarter of the 20th century, the manufacturing sector has seen massive downsizing due to increased per-worker productivity, technology advances that have rendered human labor obsolete and the availability of lower-cost labor overseas.
U.S. manufacturing companies have also increasingly shifted production overseas, closing down factories in the U.S. and establishing factories and assembly plants in Latin America, the People's Republic of China, Veitnam, etc., or using manufacturing sub-contractors owning such facilities. U.S. manufacturing and service companies have also opened call centers in India or sub-contracted with companies owing such facilities.
[edit] UK
It is important to distinguish the term "layoff" from redundancy in terms of UK employment law. The normal lay person's understanding of the term "layoff" is that one has been made redundant, i.e. that one has been dismissed. This is not technically correct. Being "laid off" just means being sent home without pay or work. This does not mean you have been dismissed. Being laid off does not preclude a return to work when business picks up under exactly the same terms and conditions as before.
Many employers reserve the contractual right to send employees home for short periods without pay when work is scarce. (Although it is rarely used outside the manufacturing sector.) If this right is indeed reserved in the contract of employment, then the employees are not entitled to immediately seek compensation in the Employment Tribunal.
However, if an employee is laid off for 4 continuous weeks, or for 6 weeks within any 13 week period, he is entitled to give his employer notice and claim a redundancy payment in the employment tribunal.
However, when most lay people in the UK talk about being "laid off" they actually mean that they have been made redundant. In UK employment law, redundancy is the dismissal of an employee when his or her job becomes unnecessary. UK redundancy law allows three reasons for redundancy:
- Total cessation of the employer's business (whether permanently or temporarily);
- Cessation of business at the employee's workplace;
- Reduction in the number of workers required to do a particular job.
The law requires the employer to make a statutory redundancy payment, which is tax-free and is based on the employee's length of service, as long as the employee has served a minimum of two years. The employee is not allowed to claim redundancy if he or she was offered an alternative position with similar salary, status and responsibilities.
[edit] Reduction in force common abbreviations
- RIF - A generic reduction in force, of undetermined method.
- IRIF - An 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 - A 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.
- eRIF – Layoff notice by email.
- WFR - Work Force Reduction
Comment “Email is no different from a pink slip enclosed with one's check,” according to Richard Moran, who as a consultant, has experience in layoffs. “Sending an eRIF message avoids all that awkward chatter between supervisor and employee. Given the instantaneous nature of email, at least everyone found out at the same instant and there was no waiting around.”
[edit] Boss as villain
The real or fictional "downsizing boss", an uncaring, selfish individual who lays off workers for his own benefit, has been a favorite villain of the 1990s and 2000s, especially in workplace satire such as Dilbert and The Drew Carey Show. In fiction, this type of person is usually depicted as male, unattractive, lacking in terms of intelligence, personality, and humor, with the air of a "petty tyrant".
Vince McMahon, the WWE owner, plays an on-air persona called 'Mr McMahon', who fires people at the drop of the hat when he feels angry/upset, which is an extreme example of a villanous boss.
In real life, Morgan Stanley's John Mack, known as "Mack the Knife", captained Credit Suisse First Boston's 10,000 layoffs. Fred Goodwin earned the nickname "Fred the Shred" while slashing the workforce at Scotland's Clydesdale Bank.
Mass layoffs are typically planned in secret and announced by surprise as a fait accompli. This means that to a greater or lesser extent the human resources departments and line managers have to be excluded from the decision-making process. Inevitably, this means that the criteria to decide who gets laid off are different from those which determine who gets hired and fired during the normal course of business.
A notable exception to this rule is when there is a trade union contract: however, in such cases, the layoffs typically follow a period when the union has been asked to make wage and work-rule concessions (ostensibly) to save union jobs.
[edit] Unemployment compensation
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.
Certain countries (eg. France), distinguish between leaving the company of one's free will, in which case the person is not entitled to unemployment benefits and leaving the company voluntarily in the frame of a RIF, in which case the person is entitled to them. A RIF suppresses jobs, rather than specific people, and is usually accompanied by internal redeployments. A person might leave even if their job is not suppressed, unless the employer has strong objections. In this situation, it is more interesting for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they found new jobs while still being paid by the old companies, costing nothing to the social security system in the end.
[edit] Derivative terms
Downsizing has come to mean much more than job losses, being the word downsize now applied to almost everything. People describe downsizing in their cars, houses and nearly anything else that can be measured or valued.
This has also spawned the opposite term upsize, which means to grow, expand or purchase something larger.
[edit] References
Moran, Richard. Nuts, Bolts, and Jolts: Fundamental Business and Life Lessons You Must Know. 2006. ISBN 1-60008-015-4
[edit] See also
- Doublespeak
- Frederick Winslow Taylor
- Fucked Company
- Office Space
- Outsourcing
- Restructuring
- Unemployment
- Severance package
- Voluntary Redundancy
[edit] External links
- 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.de:Downsizing
