Managing Employee Separations, Downsizing, and Outplacement

In This Section… Identify the costs and benefits associated with employee separations Understand the differences between voluntary and involuntary separation Avoid problems in the design of early retirement policies Design HRM policies for downsizing that are alternatives to layoffs and develop a layoff program that is effective and fair Understand the value of outplacement services

What Are Employee Separations? When an employee ceases to be a member of an organization Turnover rate The rate of employee separations in an organization Annualized Turnover Rate = (# EE’s Leaving / Average #EE’s) X (12 / # months in period)

What Are Employee Separations? (Cont.) The costs of employee separations: Recruitment costs Selection costs Training costs Separation costs Severance pay Exit interviews Outplace assistance

What Are Employee Separations? (Cont.) The benefits of employee separations: Reduced labor costs Replacement of poor performers Increased innovation Opportunity for greater diversity

Types of Employee Separations Voluntary separation: A separation that occurs when an employee decides, for personal or professional reasons, to end the relationship with the employer Quits Retirements

Types of Employee Separations (Cont.) Involuntary Separation: A separation that occurs when an employer decides to terminate its relationship with an employee due to a poor fit between the employee and the organization or economic necessity

Types of Employee Separations (Cont.) Types of Involuntary Separations: Discharges: Occur when a firm decides there is a poor ‘fit’ between an employee and a the organization Layoffs - Downsizing and Rightsizing: Downsizing: Strategy by a company to reduce scale and scope of its business to improve its financial performance Rightsizing: Reorganization of a company’s employees to improve efficiency

Managing Early Retirement Features of Early Retirement Policies: Package of financial incentives that make it attractive for senior employees to retire earlier than they had planed ‘Open window’ that restricts eligibility to a fairly short period of time

Managing Early Retirement (Cont.) Avoiding Problems with Early Retirement Policies: Too many employees may take the offer: Restrict eligibility to only redundant employees in redundant departments Ask employees ahead of time if they are interested Employees may perceive being forced to leave (could file ADEA claims): Make certain they are not treated differently

Alternatives to Layoff: Attrition: Managing Layoffs Alternatives to Layoff: Attrition: An employment policy designed to reduce the company’s workforce by not refilling job vacancies that are created by turnover Hiring Freeze: An employment policy designed to reduce the company’s workforce by not hiring any new employees into the company.

Managing Layoffs (Cont.) Alternatives to Layoff: Employment Policies: Decrease number of hours worked, workweek Encourage workers to take unpaid leaves Fill any increase in labor demand with temporary workers

Managing Layoffs (Cont.) Alternatives to Layoff: Changes in Job Design: Reallocation and relocation Bumping Job Sharing Pay and Benefit Policies: Pay freezes Cut overtime Use vacation time and leave days Pay cuts

Managing Layoffs (Cont.) Implementing a Layoff: Layoff : The elimination of jobs, often without regard to employee performance, usually when a company is experiencing financial difficulties. Also may occur if a company is changing its corporate strategies.

Managing Layoffs (Cont.) Implementing a Layoff: Worker Adjustment and Retraining Notification Act (1988) (WARN): Requires employers of 100 or more employees to give 60 days’ notice before closing a facility or starting a layoff of 50 people or more The law does not prevent the employer from closing down, nor does it require saving jobs The law is intended to give employees time to seek other work or retraining by giving them advance notice of the shutdown Penalty for failing to give notice - one day’s pay and benefits to each employee for each day’s notice that should have been given, up to 60 days

Managing Layoffs (Cont.) Implementing a Layoff Develop layoff criteria Seniority vs. Performance Communicating to laid-off employees Coordinating media relations Maintaining security Reassuring survivors of the layoffs Survivor Anxiety More work Unsettling changes Self assessment of contributions Guilt

Outplacement The Goals of Outplacement: Reducing the morale problems of employees who are about to be laid off Minimizing the amount of litigation initiated by separated employees Assisting separated employees in finding comparable jobs as quickly as possible Outplacement Services: Emotional support Job-search assistance