Layoff (in British[1] and American English), also called redundancy in the UK, is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees for business reasons, such as when certain positions are no longer necessary or when a business slow-down occurs. Originally the term layoff referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. The term however nowadays usually means the permanent elimination of a position, requiring the addition of "temporary" to specify the original meaning.
Many synonyms such as downsizing exist, most of which are euphemisms and more abstract descriptions of the process, most of which can also be used for more inclusive processes than that of reducing the number of employees. Downsizing is the "conscious use of permanent personnel reductions in an attempt to improve efficiency and/or effectiveness".[2] Since the 1980s, downsizing has gained strategic legitimacy. Indeed, recent research on downsizing in the U.S.,[3] UK,[4] and Japan[5][6] suggests that downsizing is being regarded by management as one of the preferred routes to turning around declining organisations, cutting costs, and improving organisational performance,[7] most often as a cost-cutting measure.
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Euphemisms are often used to "soften the blow" in the process of firing and being fired.[8] The term "layoff" originally meant a temporary interruption in work (and usually pay). The term became a euphemism for permanent termination of employment and now usually means that, requiring the addition of "temporary" to refer to the original meaning. Many other euphemisms have been coined for "(permanent) layoff", including "downsizing", "excess reduction", "rightsizing", "delayering", "smartsizing", "redeployment", "workforce reduction", "workforce optimization", "simplification", "force shaping", "recussion", and "reduction in force" (also called "RIF", especially in the government employment sector).
"Mass layoff" implies laying off a large number of workers. "Attrition" implies that positions will be eliminated as workers quit or retire. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. While "redundancy" is a specific legal term in UK labour law, it may be perceived as obfuscation. Firings imply misconduct or failure while layoffs imply economic forces beyond the employer's control, especially in the face of a recession such as the one that began in the late 2000s.
The method of separation may have an effect on a former employee's ability to collect whatever form of unemployment compensation might be available in their jurisdiction. In many U.S. states, workers who are laid off can file an unemployment claim and receive compensation. Depending on local or state laws, workers who leave voluntarily are generally ineligible to collect unemployment benefits, as are those who are fired for gross misconduct. Also, lay-offs due to a firm's moving production overseas may entitle one to increased re-training benefits. Some companies in the United States utilize Supplemental Unemployment Benefits. Since they were first introduced by organized labor and the Department of Labor in the early 1950s, and first issued in a Revenue Ruling by the IRS in 1956, SUB-Pay Plans have enabled employers to supplement the receipt of state unemployment insurance benefits for employees that experience an involuntary layoff. By establishing severance payments as SUB-Pay benefits, the payments are not considered wages for FICA, FUTA and SUI tax purposes, and employee FICA tax. To qualify for SUB-Pay benefits, the participant must be eligible for state unemployment insurance benefits and the separation benefit must be paid on a periodic basis.
Certain countries (e.g. France and Germany), distinguish between leaving the company of one's own free will, in which case the person isn't entitled to unemployment benefits and leaving a company voluntarily as part of a reduction in labour force size, in which case the person is entitled to them. An RIF reduces the number of positions, rather than laying off specific people, and is usually accompanied by internal redeployment. A person might leave even if their job isn't reduced, unless the employer has strong objections. In this situation, it's more beneficial for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they find new jobs while still being paid by their old companies, costing nothing to the social security system in the end.
There have also been increasing concerns about the organisational effectiveness of the post-downsized ‘anorexic organisation’. The benefits, which organisations claim to be seeking from downsizing, centre on savings in labour costs, speedier decision making, better communication, reduced product development time, enhanced involvement of employees and greater responsiveness to customers (De Meuse et al. 1997, p. 168). However, some writers draw attention to the ‘obsessive’ pursuit of downsizing to the point of self-starvation marked by excessive cost cutting, organ failure and an extreme pathological fear of becoming inefficient. Hence ‘trimming’ and ‘tightening belts’ are the order of the day (Tyler and Wilkinson 2007)