Inside HR information to help explain how “getting fired” really works, and what goes into company reductions and layoffs.

Ok – so you’ve been let go, fired, laid off, or you position has been “eliminated”. So what does that mean really? Who decides and why me and not my colleague?

In the current market, so many companies are facing major reductions in their workforce. My Linkedin is flooded with great talent looking for new jobs and #opentowork. I myself have recently been the victim of a reduction and thought it would be helpful to share some of the insight I have around how this works – behind the scenes.

*disclaimer* Every company approaches their reductions with different criteria and state protocol. Information listed in this post is for general informational purposes. Always consult an attorney if you feel wrongfully terminated or require legal advice about your employment.

Ok let’s get started. First of all, you have to understand some basic differences in job terminations. These are key differences that all have different legalities and determine how a company can go about impacting an employee.

1. Termination for cause

This is generally the term for “firing” someone, and it’s the most traditional form of termination. It’s fairly self explanatory. The company has to have a reason for letting you go, and that reason is TYPICALLY performance (i.e. you did not do the job well enough or meet expectations, etc.), OR misconduct. Misconduct is a violation of some company policy. Every company has policies, handbooks, rules and procedures ranging from dress codes, attendance policies, social media policies and more!). You probably signed off on these when you first started or “onboarded”. Like many of us – you also probably didn’t read a lot of it- but let’s assume you did. Misconduct simply means you broke the rules, and now they have an easy reason to terminate your position.

You can get fired at any time. Most states are “employment-at-will” states, which means that both you and the employer have the right to part ways at any given time, for any given reason. Unfortunately – it’s not your RIGHT to have a job, it’s your privilege. If you are not performing, many companies will give you a performance improvement plan or evaluation that gives you an opportunity to salvage your job, but these too often end in termination. There are plenty of of instances of wrongful termination, but for the purposes of this post – let’s get back to other forms of job loss.

2. Lay-off or Reduction in Force

Also known in the HR world as an involuntary termination – these are real bummers. You likely won’t see it coming, and you may or may not be notified ahead of time. You may get a severance package – you may not. It completely depends on the situation and volume of employees being impacted.

Nobody feels good about these by the way – not even the executives in their ivory towers and certainly not the HR Professionals or managers delivering the news. Try to keep that in mind if you’ve been impacted. We’re all human, and nobody wants to see anyone lose their job.

Reductions like this happen for various reasons, and unlike a termination for cause – the initial reason for these is not personal and has nothing to do with your conduct or performance (at first). A company may find themselves in a situation where their profit margins (i.e. the money they’ll make AFTER paying you and all their other overhead expenses), is not enough. Not enough typically means it will not meet shareholder expectations, or – worse – could put them out of business. There is a delicate balance of having just the right amount of people to do the work needed to keep a company profitable. There are entire jobs and professions built around calculating these numbers and analyzing this data behind the scenes and it’s not easy. With fluctuating market conditions (i.e. prices rising for raw materials, shipping, etc.) the numbers are always changing and the price to service or manufacture moves all the time. Therefore – the cost to employee X amount of people has to stay in a place where the company can still remain profitable with all of those other fluctuations. This is also known as “right sizing”. It’s very challenging to stay in this sweet spot all the time, and this is why you see companies announcing lay offs or reductions pretty frequently (especially in a less than desirable economy). This might sound really insensitive to the people, but think of it this way: if a company is not profitable – they can’t afford to grow and hire new people, or give you increases, or bonuses. Worse yet, if they are losing money – they can get a point where they can’t afford to pay you – it’s simple math.

If a reduction is large enough, it is subject to the federal WARN act, which actually requires 60-90 days of notice in writing to the impacted associates depending on their state.

Typically, but not always, involuntary reductions come with the minor benefit of a severance package. Companies all have their own severance policies and packages, but keep in mind that this is essentially compensation provided to you in return for waiving any legal action against the company. Severance packages can be delivered as lump sum payments or installments, and usually include a few weeks to a few months of pay (and maybe continued benefits or extra money to offset COBRA benefit continuation).

So how to they decide WHO to let go?

This is the million dollar question, and the really tough part. Remember – these reductions are not initiated due to one individual’s poor performance or misconduct. It’s not personal at all really. That said – there obviously has to be some criteria used to determine who makes the “list” and who stays. These can vary based on the sheer amount of people that need to be reduced, but let’s dive into some of the criteria:

1. Job Level and salary

Often times, a company looks at a reduction in terms of total dollars that need to be cut – (well, almost always this happens). But in this case, big salaries and big jobs can be an easy way for them to cut costs and impact LESS people. Again – this is a math game, and the less people impacted, often – the better. The flip side to this is that you have less executives in an organization and that means that those folks could be really important to keep the wheels on the bus, so it could be in the companies best interest to look a level or two down, and maybe target MORE of those of those folks in order to keep the more senior leader in place.

2. Performance

Any company forced to reduce talent is going to TRY not to let their higher performers go. Hopefully this is obvious to you. Unfortunately in some companies, your performance might be tied to your tenure, so perhaps you haven’t been around long enough to have a performance review or do enough impactful work to have a top tier review. Unfortunately, this may make you more at risk, but performance data will usually be evaluated in a reduction analysis.

3. Tenure

How long you’ve been with the company often plays into the equation simply due to the performance factor. Many companies will assume that the less time you’ve had, the less productive you are for them overall. OR in some cases – the less time you’ve had means that the less severance they’ll have to pay you out at your departure – so unfortunately, it will cost them less to terminate you than someone who has been with the org for 10-20 years and will max out a severance package. (We’ll get to severance in a minute).

4. Function or Niche Skill

Depending on what the company does – they may stay away from their core talent during a reduction and focus more on the support functions like finance, legal, HR, communications, etc. Typically the impact of letting core talent go, is greater than other business support functions. That said, if the company has over hired specifically in their core talent (ex. tech company – software engineers) – they may ONLY target in that group.

There are other factors or criteria that might be used such as legal implications, adverse impact (diversity and protected class considerations), contracts, worker type, but we can get into those another time. Most of the time, the above factors will form a rubric that allows the company to form a list of impacted individuals.

How do those lists get vetted?

It completely varies how a company will finalize that list and deliver the news. I have seen organizations partner very closely with middle management to review these lists and tailor the lists based on unique situations or deliverables. In addition, legal teams will likely get involved to review the lists for what is known as “adverse impact analysis”. This is a review of each individual and their protected class as it relates to the rest of the impacted associates. Essentially making sure that they do not have a disproportionate group of protected class employees that are captured on the list. Larger organizations tend keep these lists closer to the vest, and leverage clean simple formulas for selecting and notifying. They often do not involve middle management, and notify employees in mass vs. having a supervisor deliver the news. You’ve likely seen this recently with some of the larger companies in the market and on the news.

I think one important take away I would hope everyone understands is that a true lay off is NEVER desirable and it’s not personal. You are NOT your job. You can not let a job loss define your accomplishments or perceived failures for all of the reasons above.