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How To Lay Off Employees: 5 Things to Know

By Neetal Parekh | Last updated on

Being a small business owner can be difficult in even the best of times. You are called upon to be the finance department, marketing specialist, head product developer and human resources expert all at once. But, when the economy takes a turn for the worse, running a small business becomes even more challenging. For example, in these difficult economic times, you may be wondering how to lay off employees. Here are five things you should think about when you are considering laying off employees:

1. Small business employers should consider alternatives to layoffs.

Layoffs are always difficult because they are often due to external forces such as budget cuts or periods of economic slowdown.  For small businesses, laying off employees can have a major effect on productivity and morale.  Alternatives such as reducing hours and implementing non-monetary incentives can help a small business weather a rough patch while also retaining talented and skilled employees.  However, employers should be wary about changing an employee from full-time to contractor status for cost savings, because if the worker's job duties remain essentially the same, the employer could be penalized for misclassification.

2. Employers are required to give notice to employees about plant closing or mass layoffs.

According to the Worker Adjustment and Retraining Notification Act (WARN) , employers with at least 100 workers must provide 60 day notice before any sweeping layoffs or before a manufacturing plant closes.   Many states have enacted similar state laws that apply to small businesses employing fewer than 100 employees.

3. Employers cannot lay off employees for jury duty.

The Jury System Improvements Act protects workers from employer discharge or discipline for serving on a federal jury.  State law in 35 states also prohibits employers from firing workers for serving on juries in state court cases.

4. Consider giving a severance package.

Though it is a norm of large businesses, small businesses may be able to create goodwill with its workers and raise company morale by offering a severance package, even in light of a difficult economy.  A standard severance package may provide 1-2 weeks pay for each year the employee has been with the company.

5. Employers are obligated to protect employee confidentiality.

A key responsibility of employers during the time of deciding on layoffs and determining which positions and employees will be let go, is to fiercely protect the privacy of employees.  Employers should avoid talking about particulars of layoffs in common areas, leaving any written or printed materials in public view, or discussing numbers or severance packages with colleagues and employees or over email.

In order to ensure that the layoff process is proceeding smoothly and according to the letter of the law, the small business may choose to retain an attorney or consult with a human resources specialist before, during, and after the process of laying off employees.

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