In general, laying off an employee is typically for reasons that are no fault of their own. That means the reasons are typically for external business factors, like changes to the company or needing to downsize.
As an overview, commonly accepted reasons for laying off employees often include:
- Cutting costs: When a company’s finances take a turn for the worse, one way of surviving is to lay off workers to save costs. While this can have the desired financial effect, it’s important to consider the additional burden placed on the remaining employees.
- Mergers and acquisitions: When bringing two companies together, there are typically overlaps in functionality. For example, does the resulting company really need two accounting departments? Often, the answer is “no,” and one of the departments, or some employees from each, are laid off.
- Moving: When a company relocates, many employees cannot, or are not willing to, move with the business. This often leads to the layoff of those employees.
- Changes: Companies can undergo change for many reasons such as leaving a product market or modernizing a plant with more automation. In these cases, redundant employees are often laid off as part of the change.
- Outsourcing/Offshoring: if the finances are right, a company may decide to outsource or offshore some of their processes. In these cases, employees who had held those positions are often laid off.
Firing vs. Laying Off
Note that these are all reasons to lay off an employee, not fire them. For an explanation of the difference between the two, click here.
Know the Law
Certain justifications for laying off an employee are just plain illegal. Click here to see the illegal reasons for terminating employees. As a rule of thumb, it’s always best to consult your state laws on the matter and consult an HR expert in your area to ensure your reasons for terminating are indeed legal and justified.