Managing Employee Separations, Downsizing and Outplacement CHAPTER SIX Managing Employee Separations, Downsizing and Outplacement

Chapter Objectives Review Key Terms Identify the costs and benefits associated with employee separations Understand the differences between voluntary and involuntary separations 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 Review Key Terms Attrition Employee separations Exit interviews Hiring freeze Involuntary separation Outplace assistance Turnover rate Voluntary separation

Key Terms Employee separations Turnover rate The termination of an employee’s membership in an organization. Turnover rate The rate of employee separations in an organization.

Costs of Employee Separations The costs of employee separations Recruitment costs Selection costs Training costs Separation costs Severance pay Exit interviews Outplace assistance

Benefits of Employee Separations The benefits of employee separations Reduced labor costs Replacement of poor performers Increased innovation Opportunity for greater diversity

Types of Employee Separation 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 Separation 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 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

Alternatives to Layoffs – 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 Avoiding problems with early retirements A longtime employee who has performed satisfactorily over many years suddenly receives an unsatisfactory performance evaluation A manager indicates that senior employees who do not take early retirement may lose their jobs anyway because a layoff is likely in the near future Senior employees notice that their most recent pay raises are quite a bit lower than those of other, younger workers who are not eligible for early retirement

Alternatives to Layoffs – Employment Policies 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.

Alternatives to Layoffs 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 Retraining

Implementing a layoff Notifying employees 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. Notifying employees Worker Adjustment and Retraining Notification Act of 1988 (WARN)

Worker Adjustment and Retraining Notification Act of 1988 (WARN) Employment losses covered by the law: Terminations other than discharges for cause, voluntary departures, or retirement Layoffs exceeding six months Reductions of more than 50% in employee’s work hours during each month of any six-month period. 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.

Worker Adjustment and Retraining Notification Act of 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.

Implementing a Layoff 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