Guide to Managing Layoffs or Downsizing

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.