Dealing With Possible Employee Layoffs During a Recession

The word “recession” has been tossed around a lot lately. Whether or not the country is in a true recession is a point of disagreement among experts.

No matter your views on whether or not we are in a recession, one thing is certain: the economy is struggling, and for some small businesses, that has meant having to let employees go.

Never Easy

The decision to lay off employees is never easy, and should not be taken lightly. Remember that there are many ripple effects to letting someone go.

Yes, you will save on the cost of that employee’s payroll, but who is going to do the work of that employee?


Some small business owners plan to take on the tasks themselves, but many others farm out the work to the remaining employees.

Depending on the amount of work and the number of employees, this may be acceptable.

Sometimes, however, the remaining employees are asked to take on a workload that is too large.

This not only is bad for morale, but it will also hinder the quality of work.

Is it the Only Option?

Some small business owners have asked their employees to take an across the board pay cut rather than laying off an employee.

When faced with the choice between the two, most employees would rather lose a small percentage of their salaries than be out of work.

Let employees know that once the crisis is over, you will bring their salaries back to their current amounts.

Unnecessary Losses

Sometimes, in the middle of hard financial times, it is easy to forget some things.

One thing that might slip your mind is how difficult it can be to find good employees.

Do you really want to lose the employee that you are letting go? If not, then think long and hard before laying off employees.

Only do so when all other cost saving options have been exhausted.

Other Options

If you are looking for ways to save money so you won’t have to deal with employee layoffs, try making cuts in areas that do not directly contribute to your bottom line. Office supplies and furniture, travel expenses, and even downsizing your office space are all options to consider.

If You Must

If all other options have failed, and you must go ahead with an employee layoff, there are some steps you should include in the process.

First, be sure you adequately document the need for the employee layoffs. This will help you should a former employee bring any type of wrongful termination suit against your business.

Second, you will have to determine who will be let go. Use objective and measurable reasons for making the decision such as sales, and past performance reviews. Some business owners also take seniority into account.

Third, decide what benefits you will provide to your laid-off workers.

When giving employees the bad news, have someone else in the room, such as the human resources manager, whenever possible.

Telling the Remaining Employees

Some business owners make the mistake of not telling the remaining employees what is going on.

This is a mistake as it means their only source of information will be the rumor mill. You want the information to come from you because employee layoffs are not easy for anyone involved.

However, if they are necessary, then be sure to handle them in the most efficient manner possible so that you can get back to turning your business into a success.

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