How to Lay Off An Employee — the Right Way

Companies that fought to attract and keep staff have been learning the hard way how to shed them in a hurry. But that doesn’t mean it can’t – and shouldn’t – be done right

March 21, 2016

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One day last October, when employees at Cenovus Energy showed up at the office, many discovered that they couldn’t access their computer files on the company’s internal system. That’s how they found out they were being laid off. Two months earlier, employees at Hutchison Ports Australia in Sydney and Brisbane got a text message, then an email in the middle of the night inviting them to a beachside hotel. They, too, were being laid off.

Cenovus called its move a mistake. Hutchison Ports Australia said it had begun its consultations with staff and unions regarding redundancies in June. Whatever the explanation, companies need to start approaching layoffs more carefully. And though everyone in the energy business is hoping the bloodletting is over, if it isn’t, there are ways to soften the blow of layoffs, and do them fairly and transparently.

A company should keep its employees informed of the economic forces acting on the business and their employment prospects, says Martin Birt, president of and a human resources consultant with 30 years in the business. “Closures…should never, in my view, be a surprise,” he says. Neither should layoffs. You can communicate messages with your employees such as how decisions will be made in what Birt calls a “long-game communications plan,” a set of HR principles that will be applied should anything be decided regarding the company’s long-term employment potential. That way, employees have some context as to what to expect when market circumstances change.

If you choose not to share your long-game communications plan in your employee manual, when speaking to the people you’re laying off, at least communicate how, why and when you made the decision, Birt says. Your actions will get back to suppliers, contractors and layoff survivors. And if you’ve communicated fairly and awarded appropriate compensation and benefits, the external environment will understand what kind of corporate citizen you are.

Listen to Your Experts
Involve the correct teams – operations, human resources and legal – and involve them as early in the decision-making process as possible, says Birt. These teams will protect you as a corporation from any liability associated with a layoff.

Soften the Blow
Henry Hornstein is an assistant professor at Sault Ste. Marie, Ontario’s Algoma University, specializing in organizational change management. In the early 1990s, he was among the staff let go from Imperial Oil’s Strathcona refinery. “It was not pleasant,” says Hornstein, “but the way Imperial Oil handled that at the time cushioned the blow.” They provided him with a year’s worth of salary and benefits, and services with an outplacement firm. These included resumé writing, interview training and networking support. “Rather than treating people as commodities, people are treated compassionately,” says Hornstein of the experience. You can provide your employees with psychological support in addition to proper severance, benefits and outplacement services, he says. Consider offering group meetings where people can talk to others about the negative psychological impacts of downsizing that they’ve experienced. “Downsizing is a significant assault on an individual’s self-esteem…Everybody has a story, and when somebody is downsized, the organization can [seem to] take an approach that they don’t care what the background story is, they just want to get rid of the people.” says Hornstein. Birt agrees, saying companies should be prepared to offer an employee assistance program (EAP), a short-term counseling service for employees in need of support. This can also add a buffer against the company’s liability.

Having said that, to maintain confidentiality, limit the planning group to only those whose participation is necessary, says Birt. Consider using specific project-related confidentiality agreements, as well, and clearly describe the consequences for breaching confidentiality. He also suggests reminding participants with pre-existing confidentiality agreements of the terms of those agreements. If you are a publicly traded company, you should know if you are required to first inform the markets of your actions. If that is the case, managers must be prepared to communicate with employees immediately after informing the markets.

Finalize the Details
Before you deliver the news of layoffs, finalize all the details with human resources and legal, including severance, benefits and pension entitlements, says Birt. You’ll be prepared to immediately answer individual questions. Everything you say orally in a termination meeting should be captured in a termination letter as well, he says. However, give terminated employees a few days to review their termination package and ask any questions, says Fraser Johnson, a professor at the Ivey School of Business in London, Ontario. “As soon as you hear the words that you’re being laid off, your mind might go blank,” he says.

Share the Pain
Rather than targeting employees with layoffs, share the cuts across the corporation, just as Canadian Natural Resources did when all staff pay was cut by up to 10 percent. Or, introduce flexible work arrangements like part-time work, voluntary leaves of absence, or deferred compensation in which an employee can work full-time at 80 percent salary for several years before taking a paid sabbatical.

More posts by Julie-Anne Cleyn

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3 Responses to “How to Lay Off An Employee — the Right Way”

  1. ricco gotti says:

    The problem with most of the oil company’s is the people running them are smart as a shovel…

    • Susan says:

      You should check your facts. Canadian Natural has been laying off strategically and quietly for the last year an half. Below the legal limit to not disclose legally and pretend like it is not happening. Now is that the right way? they want to remain pillars in the community however they are being very practicing very dirty methods.