Layoffs and Employee Compensation

Write a 6 to 8 page paper in which you:

Propose three ways that a manager can cope with any negative emotions that may accompany an employee layoff.
Describe a step-by-step process for conducting the dismissal meeting.
Determine the compensation that the fictitious company may provide to the separated employee.
Create a chart that depicts the timeline for the disbursement of the compensation.
Use Microsoft Word or an equivalent application, such as OpenOffice.
Predict three ways that this layoff may affect the company.
Use at least three high-quality academic resources in this assignment.


Layoffs and Employee Compensation

Laying off employees is usually one of the ideas that come into managers’ minds when an organization goes downhill or faces severe financial challenges. Nonetheless, layoff decisions are not popular especially among employees, obviously because of the negative emotions associated with being laid off. For the affected employee as well as those that survive, mass layoffs and downsizing can be very traumatic (Grunberg, Moore & Greenberg, 2006). Losing a job, regardless of the reasons, often causes despair, fear, frustration and even depression (Pettinger, Nelson & Economy, 2007). Layoff decisions should, therefore, be carefully thought out and implemented with a lot of sensitivity. In this essay, practical strategies of conducting layoffs are discussed. The paper also outlines some of the impacts that layoffs have on companies.

Ways that a manager can cope with any negative emotions that may accompany an employee layoff

Where layoffs are the only option for managers, several strategies are helpful in coping with any negative emotions. Firstly, effective communication plays a huge role in preparing employees. The 2002 Employment Act has outlined a standard procedure that ought to be followed when disciplining and dismissing employees. The procedure consists of three steps, namely statement, meeting, and appeal (Elearn Limited, 2008). The key point in the three steps is that proper communication must be ensured during employee dismissal. The law requires employers to provide written statements that describe the reasons for the decisions being made. Similarly, the employer and employee must meet and discuss the issues at hand, after which the employee is allowed to appeal the decision if he/she wishes (City Law School, 2008). The deduction that can be made from this three-step procedure is that with effective communication, negative emotions on the employee’s part can be eliminated simply because the employee understands the circumstances leading to the layoff.

Secondly, managers can employ empathy to help employees overcome any negative emotions. Research has shown that “managers who handle the process with sensitivity rather than with distancing behaviors can substantially reduce negative reactions from survivors and victims,” (Grunberg et al., 2006 p.160). Being sensitive means that the manager understands the pain and devastation that victims are experiencing; he thus allows them sufficient time to vent their frustrations.

Thirdly, offering a reasonable compensation to affected employees may also be considered a strategy of helping victims of layoffs to cope with negative emotions. For most people, being laid off causes fear, despair and depression especially if the employee has not made enough savings or investments. To ease such emotions, a severance package and other dismissal benefits (Pettinger et al., 2007) may be considered. Such a package will provide some relief, albeit temporary, to the affected employees knowing that they have some money to keep their families going until they get another job.

Conducting the dismissal meeting

The dismissal meeting should be conducted in three major steps: statement, meeting, and appeal. The manager should start by issuing a written statement to the employee, wherein details about the behavior or circumstances leading to the dismissal are outlined. In this written statement, the manager will also make an invitation to the affected employee to attend a meeting in which the matter will be discussed in more detail (City Law School, 2008). The purpose of issuing such a statement, according to the City Law School (2008), is to allow reasonable time for the employee to consider the response that he/she will give.

The second step in a dismissal is the meting itself. Here, the employee and the employer meet and talk over the issue (Elearn Limited, 2008). The employee is made to understand the reasons why he/she is being dismissed. This means that it is the employer’s duty to bring to the employee’s attention the specific policy or policies that were breached or standards that were not met (Pettinger et al., 2007). An important point to note here is that once the meeting is held, the employer has the obligation to notify the affected employee of the decision, and more importantly, point out the right to appeal that the employee has (City Law School, 2008). In other words, granting employees the right to appeal is the highest indicator of fairness in dismissal decisions.

If the employee chooses to appeal, the third step in the dismissal process will be for the employer to invite him/her to another meeting. “It is desirable for the employer to ensure the employee is represented by a more senior decision maker than at the previous stage” (City Law School, 2008 p.140). This suggests that employees have a right to be guided by other people regarding dismissal decisions. After the appeal meeting, the employer communicates his/her final decision and the date on which the dismissal is deemed effective is communicated.

Compensation for a separated employee

The amount of compensation that firms should give to separated employees is determined by several factors. An important factor to consider when calculating severance pay is the prevailing state law regarding compensation, as different states have different laws concerning this (Cifu, 2015). Secondly, the company will determine whether or not the affected employee has been in continuous service in order to qualify for compensation. When the employee is established to have been in continuous service, he/she is entitled to 50% of his/her basic wages. In addition to this, the employee must receive his/her salary or wages for the month served prior to the lay-off. For an employee whose basic wages amount to, say, $40,000, it means that he/she should receive at least $20,000 as compensation for continuous service.

Although not obliged to, the company may also decide to give severance pay to the laid-off employees. Severance pay will be determined by the length of time that the employee has worked with the company. For instance, if the employee was working on hourly wage basis, he/she will be given one-week’s pay for every year that he/she has served with the firm. This means that assuming the employee stayed for eight years, his/her severance pay will be eight weeks’ pay at the current pay rate. If the employee was working on a salary basis, he/she is entitled to a minimum of two weeks’ compensation for every year worked. This means that the employee’s annual salary will be divided by 52 to arrive at the rate at which he/she is paid weekly. Assuming the affected employee at XYZ Company earned $52,000 annually. His/her weekly earnings would therefore be $1,000. If the employee had worked at XYZ for 15 years, he/she would receive $15,000 as severance pay.

Timeline for the disbursement of the compensation

Layoffs are not popular decisions and are resorted to when a company is in serious financial trouble. In reference to this fact, it may be said that not all companies are in a position to make a bulk, one-time compensation to laid-off employees. More precisely, there may be times when companies have no option but to disburse compensation to affected workers in instalments. The challenge may be greater if the company is laying off quite a number of employees. To ease the pressure and enable the company to remain operational even as it compensates laid-off employees, the following chart may be applied:

Nov 30th 2020$20,000
Dec 31st 2020$5,000
Jan 321st 2021$5,000
Feb 28th 2021$5,000

Impact of layoffs on companies

`           In most cases, layoff decisions are implemented in response to inevitable changes that take place in the business environment. They are thought to be necessary for organizations seeking to enhance efficiency as they compete with other players in the industry. Similarly, layoffs are said to help companies to reorient themselves and shift direction in response to customer demands and needs (Stewart & Brown, 2020). While there is some logic in the claim that layoffs may help to improve efficiency and profitability in organizations, it has been established that the impacts are not very clear. For example, it is reported that organizations that do layoffs record similar financial performance as those that do not implement layoffs (Wiley & Kowske, 2012). Such a finding casts doubts on the relationship between layoffs and enhanced productivity and efficiency. The explanation for this is that layoffs negatively affect organizational commitment among survivors (Parboteeah & Cullen, 2013). Survivors become less attached and will exhibit a greater urge to seek jobs elsewhere. Without doubt, this causes decline in productivity.

There are instances where layoff damages the reputation of companies. Flanagan and O’Shaughnessy (2005) conducted a survey of the most admired firms in America, seeking to understand the impact of layoffs on company reputation. The survey revealed that an organization’s reputation is negatively affected by layoffs. This applies to customers as well as prospective employees, with the general impression being that layoffs send a negative signal to stakeholders (Flanagan & O’Shaughnessy, 2005). Companies that resort to layoffs on a frequent basis are more likely to suffer a negative brand image due to the notion that layoffs communicates a lot about the quality of service or product that a company can offer (Flanagan & O’Shaughnessy, 2005). In light of these, the conclusion is that layoffs may generate more harmful than beneficial impacts on companies, especially in the long-term.


            Downsizing may appear to be a feasible option for companies facing intense pressures that negatively affect the financial position. However, such decisions should only be made as the last resort when all other options have been weighed and found unhelpful. Although companies may purport to gain short-term benefits by laying off employees, the long-term impacts tend to be disastrous: a damaged reputation, substantial loss of organizational commitment and productivity, and declining profits. The emotional impact on affected employees as well as survivors is another factor to be taken into consideration. Where a layoff is inevitable, managers should demonstrate compassion, sensitivity and empathy when executing the process. Communication with affected employees is of utmost importance as it helps them to embrace the decision. Similarly, allowing employees to vent any frustrations and anger is recommended. Where possible, severance pay should be given to help victims with the transition process.


Cifu, D. X. (2015). Braddoms physical medicine and rehabilitation. Elsevier Science Publishing.

City Law School (London, England). (2008). Employment law in practice. Oxford University Press.

Elearn Limited. (2008). Managing legal and ethical principles. Elsevier.

Flanagan, D. J., & O’shaughnessy, K. C. (2005). The effect of layoffs on firm reputationJournal of Management31(3), 445-463.

Grunberg, L., Moore, S., & Greenberg, E. S. (2006). Managers’ reactions to implementing layoffs: Relationship to health problems and withdrawal behaviors. Human Resource Management: Published in Cooperation with the School of Business Administration, The University of Michigan and in alliance with the Society of Human Resources Management45(2), 159-178.

Parboteeah, K. & Cullen, J. (2013). Business ethics. Routledge.

Pettinger, R., Nelson, B., & Economy, P. (2007). Managing for dummies. Wiley.

Top of Form

Stewart, G. L., & Brown, K. G. (2020). Human resource management: Linking strategy to practice. John Wiley & Sons.

Bottom of Form

Wiley, J., & Kowske, B. (2012). Respect: Delivering results by giving employees what they really want. Jossey-

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