Firing Employees and Laying Off Employees: Be Respectful

Understand the Effects of Downsizing On Your Business

Firing employees due to non-performance is difficult; laying off employees due to poor business performance is harder. The effects of downsizing are significant; understand employee rights termination practices.

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No one likes firing employees or laying off employees due to a work slowdown. No one. It is an emotional time for the employee and even for the employer.

Before you fire or lay off employees staff in your employ, make sure it is the right decision.

If You're Firing Employees Due to Non-Performance:

Have you tried coaching, employee training development, transferring the employee to another position within the business? Have you had face to face discussions with the employee, conducting performance evaluations and telling him or her clearly what's wrong with their performance and how they can improve it, and then given them the time and opportunity to improve?

Firing employees (also known as terminating employees) is typically a result of the individual's ongoing poor performance.

Laying Off Employees:

Whereas an employee layoff is typically a result of the business' poor performance (short term or long term). Poor business performance can be a management issue but it can also be a result of factors beyond your business' control (e.g. a large customer goes bankrupt and you need some time to replace that lost volume or the economy goes into a recession cycle).

Before you lay-off an employee, make sure that you have assessed your business needs far enough into the future (update your small business plan, including the work you need to do with, and on, your human resource planning. It is not good to lay-off now, and then five weeks later have to re-hire staff.

(If you think that your scenario is short term (that is, that this is just a temporary slow down), then have a staff meeting and talk with them about it. Maybe instead of laying off staff, you could reduce their hours. Maybe some staff have vacation time pending – let them take it now.)

Employee layoff is typically a result of an economic or business slowdown. Do you have any business opportunities in the pipeline? No. Then consider how your competition is doing. Are they doing better than you right now? Might they need staff? Give them a call and see if they have any interest in your employee or employees. This is the right thing to do if you value your employees – remember, they have to pay bills and rent too.

Because firing employees or laying-off is such an uncomfortable task, many business owners do it badly.

Effects of Downsizing:

You just want to do it quickly but in the process you can do some damage. Some of the effects of downsizing is poor morale, lack of credibility (as an employer), and broken trust. Remember that your employees will likely still talk with one another.

If you lay off two people and do a bad job of it, or even if you terminate someone with cause but do it with insensitivity to their feelings, they might very well still be in communication with the other staff that still work with you.

The remaining staff will hear that you did not terminate or lay-off with respect. They will not feel good about working for you and you may find that the outcome of firing an employee badly is that you have a difficult time retaining good employees.


Years ago, when I was working in big business, I was asked to be a witness at a firing. (This was common at the time, to have someone in the office in case there was a dispute about the content of the meeting.

For small business owners today, the alternative approach is to put the communication in writing before the meeting and use the script to discuss the why, the what and the how of the lay-off or termination.)

It was one of the most uncomfortable experiences of my career. The manager called in the employee, told him he was being terminated immediately for poor performance and that he had run out of chances to improve his performance, handed him an envelope and then told he would be escorted out the front door. The meeting lasted less than 5 minutes. The employee didn’t know what hit him and had no time to ask questions. He left the office with tears in his eyes. It was demoralizing, insensitive and unnecessary.

I was angry that I had been a part of this experience – and I told the manager that. Shortly thereafter I left that department (for unrelated reasons) but the memory of that termination has stayed with me forever – it was a learning experience for me.


Employee Rights - Termination

Unfortunately firing employees and employee layoffs are part of being in business; I've had to do more than I've ever wanted to. However, I have always ensured that the employee understood why; that they had an opportunity to talk. I have always tried to enter and leave these conversations with a respect for the individual.

Remember employee rights. Termination is governed by rules and regulations of local governments; and should be covered in your business policies. Make sure you adhere to them.

Some employees can 'read' what's coming (the termination). Typically you will have had some conversations with the employee about what they need to do to improve their performance.

You will have gone over their job description in detail, and discussed expectations. Then they've probably received some written letters of warning and other corrective actions. But they don't, or can't, improve their performance.

Be careful with these employees, their performance might actually get worse as they recognize they are on their way out. Be careful also that they don't influence other employees (their 'friends') against you.

Do not wait too long to let this type of employee go – they can have a significant, negative impact on your business. If you have tried to work with the employee to improve his or her performance (make sure you define a reasonable time period for improvement), and they haven’t been able to do so, act on this lack of improvement.

The Process: Firing Employees or Laying off Employees

I suggest writing the reasons in a letter (make sure you have legal advice and/or a template reviewed by a lawyer - there are employee rights termination issues), the notice period, the termination date, etc.

Follow the labor laws in your area for terminations and layoffs. I also suggest, particularly if terminations are uncomfortable for you (as they are for most people), that you write a script about what you want to say. Read it out loud a couple of times to practice it and then call the employee in.

There are many advantages of outsourcing for your business however do not outsource or contract out, firing employees or laying off employees - this is your responsibility as the business owner.. You must learn to do this as well as possible and then move on to running your business.

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