Managing Layoffs or Downsizing | How-to Guides for running your business from Business.com

Nobody likes the idea of layoffs, but sometimes handing out pink slips is the only solution to protect your business's bottom line. With proper planning, downsizing can be handled with care and dignity. Advance preparation can also help reduce the risks of lawsuits and minimize the negative impact downsizing can have on remaining employees. Plan a strategy that includes:

Job search assistance for downsized employees.
Motivation and support for remaining employees.
A clear picture of how the workload will be redistributed.
All necessary legal documents and benefits forms.

Action Steps
The best contacts and resources to help you get it done

Define your vision

Your first step is to come up with a clear picture of how you want your organization to function post-layoffs. Consider which employees or departments are most necessary to make that vision a reality. Develop an organization chart to show who will be handling specific tasks after downsizing. Be sure to redistribute the workload of employees being laid off.

I recommend: Download organization chart templates from Microsoft.

Contact the Department of Labor

Tap into the Department of Labor's Rapid Response services for employers, which offers coordinating services to help transition displaced workers and to minimize disruption due to layoffs.

I recommend: Find the Rapid Response coordinator in your state at the Department of Labor Web site.

Stay within the law

To minimize the risk of lawsuits, conduct layoffs in accordance with the law. Most important is being able to demonstrate that employees are being downsized based solely on specific business-related guidelines.

I recommend: Consult an attorney who specializes in employment law. Find one at Lawyers.com, or download a free layoff and recall policy from Personnel Policy Service that includes guidance on selection criteria for layoffs and evaluating employees for layoff.

Maintain good records

Document the layoff process with the necessary forms, including information on details such as final pay, COBRA rights and retirement plan distributions.

I recommend: The Executing Layoffs package from MyWorkTools.com includes all the downsizing documents required by law. HRDirect.com offers employee separation forms that walk you through the necessary steps involved in layoffs to ensure you handle them properly.

Determine severance pay

Severance pay is typically based on the length of employment. A common guideline is offering employees one week's pay for each year of employment. There are no laws governing severance pay and it's up to your discretion. In exchange for severance pay, many employers ask employees to sign a general release that minimizes the risk of future lawsuits.

I recommend: Download a general release for employee termination that can be tailored to your needs.

Provide opportunities

Consider contracting with an outplacement service to ease the transition for downsized employees.

I recommend: After you hand your employees the pink slip, send them to Quest Career Services, which offers outplacement services whether you're laying off a single employee or dozens of them. Action Management Corporation provides resume assistance, negotiation advice and assistance with job searches.

Tips & Tactics
Helpful advice for making the most of this Guide

Secrecy isn't necessarily the best policy when layoffs are in the pipeline.
Oftentimes, employees will leave of their own accord, eliminating expensive severance packages.
After layoffs, provide open communication with remaining staff. Managers should meet with the staff regularly to answer any questions about extra workloads or the reorganization of assignments.