It can be hard to keep track of where employers stand with their workforce lately. Is there a labor shortage or do employers have too many workers?
Well, it often comes down to what industry you’re in. For example, the healthcare and hospitality industries are still experiencing a high number of job openings. On the other hand, layoffs are ravaging the tech industry — more than 1,000 tech companies made layoffs in 2022 — as a result of rapid post-pandemic rehiring sprees, elevated interest rates, high inflation, and fears of a looming recession.
But laying off employees isn’t the only way to reduce your workforce. If you’re in an industry that needs to downsize, you might consider offering voluntary severance. When done strategically, it’s an effective way to amicably downsize, encourage underperforming workers to resign, protect your brand reputation, and limit the possibility of employee litigation.
How Amazon made its buyouts work
A successful recent case of voluntary severance was at Amazon. Back in November, the retail giant needed to eliminate as many as 10,000 jobs. Employees who volunteered to step down were offered reasonable severance terms (e.g., three months of pay minimum and temporarily continued or subsidized insurance).
This wasn’t a golden parachute, but it was gentler than a forced layoff would’ve been right before the holidays.
When voluntary severance backfires
Another high-profile (and far more controversial) recent case was at Twitter. When Elon Musk took over the social media company, he demanded that employees commit to being “extremely hardcore.” If they didn’t agree to work intense hours, they could resign with an extra final payment, which came across as a threat and sparked media outrage.
Make voluntary severance work for you
Employee reductions are often met with resistance and unrest, but offering voluntary severance can soften the blow. It’s reasonable to inform employees that they could risk involuntary terminations otherwise — but you might want to limit your use of the term “hardcore” while doing so.