Mass Layoff Risks
From OrgChart.net
Contents |
Overview
The liabilities associated with reduction in force or mass layoff can be numerous. Lack of preparedness to deal with the situation can make things worse – much worse than what prompted resorting to reduction in force (RIF) in the first place. Every choice made has its consequences and when an organization chooses to eliminate positions or shut down facilities/units altogether, the risk arises in many forms – financial, psychological, social etc.
Financial Risk
The financial risk is the one risk that is most important to prepare against. Organizations can be faced with a barrage of lawsuits, especially when layoffs are resorted to during recessionary times. Employees may be fearful of not finding suitable reemployment during the downturn and this may trigger legal action by larger numbers. The claims can be of many kinds and therefore the discerning employer should have secured all sides before taking the step. Employees whose services have been terminated could bring up lawsuits related to wrongful termination and unlawful discrimination. There is also the dicey area for the organization of employees who are on leave of absence and whether they are immune from being added to the layoff list.
There are stringent laws that require all dues to be paid immediately upon termination of services. Often times organization’s management gets so caught up in dealing with the administration of the larger process, that individual dues get ignored and later beget larger penalties in the form of employee claims.
There is often the legal requirement that employees be served notice prior to termination of employment. Organizations may face significant trouble if compliance with mandatory regulations is not exercised. The terminated employees have to be notified about status of medical/health benefits, unemployment benefits etc. The notice should also carry all other relevant details regarding the layoffs.
Trouble may also arise when the separation agreements or severance packages are not properly drafted. Unless there is acknowledgement of all dues paid, legal exposition of whys and wherefores of the layoff, loopholes could put the employer in the eye of the storm.
Violence at Work Place
The fragile state of the economy, uncertain future and confusion about the layoff may also set off something as undesirable as violence at the workplace. Clear communication, empathy and compassion can ease the immediate pain and confusion among the affected employees.
Morale of Remaining Employees
The organization’s productivity may take a hit instead of getting improved. People who remain behind are affected by what is known as survivor’s guilt. They may, on one side feel responsible (however wrongfully) about the misfortune of the sacked employees and on the other hand they may soon be rid with insecurities that they may be the next ones on the firing line. It is a massive dampener to employee performance and can lead to their fleeing the job as soon as another opportunity presents itself. Organizations have often faced serious absenteeism in such cases.
Image of the Organization
An important area that takes a beating in such cases is the public image of the organization. There is a risk of being branded as ‘employee unfriendly’ firm. This may not allow real talent to even think of a career with the organization.
Success is a two way street for any business. It has to strive for the best interest of the employee and they in turn do their best for the firm. Even if a layoff has to be resorted to, efforts like empathetic one-on-one sessions and help in the form of outplacement services can go a long way in saving the day for an already troubled organization.
