How to Lay Off an Employee: Industry Best Practices

A manager carrying a briefcase and newspaper gets to his office to read how to lay off an employee.

Posted on

August 14, 2019



Almost every company has an employee onboarding process to help new hires start their jobs on a positive note. In contrast, the employee offboarding process doesn’t get much attention. Yet how you manage an employee exit can have a gigantic impact on your company’s ability to attract and retain employees.

This is because departing employees who feel mistreated or undervalued during the offboarding process are unlikely to return as boomerang employees, and more likely to leave negative reviews on sites like Glassdoor and social media. Those shared opinions can affect your company’s ability to recruit new talent. In addition, negative company reviews can lower the morale of existing employees.

If your company goes through a reduction in force, it’s important to create a positive offboarding process. Here are nine steps on how to lay off an employee with care and compassion, allowing them to move on on a positive note while allowing your company to protect brand reputation and avoid legal complications.


Step 1. Prepare Early

Don’t put off planning how to lay off an employee if you know a reduction in force is imminent. The Worker Adjustment and Retraining Notification (WARN) Act requires that companies with 100 or more full-time employees give written notice 60 days before the date of a mass layoff. In some states, you’re required to provide an even earlier warning. Find out from your state Department of Labor what laws govern your company, and check with any unions your company works with to meet contractual obligations.

Even if you’re a smaller company and not required to provide your workforce with prior notice, you may still want to do so. According to the Society for Human Resource Management, “some experts say that employees want to know if layoffs are being considered.” Letting workers know about the company’s plans as soon as you’re able allows affected employees more time to plan and look for new jobs.


Step 2. Create a Checklist

From processing final paychecks to following state and federal laws, there are many details to keep track of when conducting layoffs. Make the process simpler with a checklist—like Intoo’s Reduction-In-Force Checklist, which outlines the 16 steps to successfully managing a layoff.

You can also create your own checklist. Make sure to consider federal, state, and local laws, union agreements, and your company’s own employee handbook and contracts in creating your list.


Step 3. Plan the Layoff Meeting

If you’re wondering how to lay off an employee in a way that best preserves their dignity, begin by thinking carefully through the basic details of the layoff meeting.

First, pick a day that will be least disruptive to your company and its employees, as Harvard Business Review recommends. The meetings are generally best held at the end of the day, after other workers have left, according to Forbes.

Plan to meet in a neutral place, like a conference room, and have both the employee’s manager and an HR professional present—along with security personnel, if needed.


Step 4. Prepare a Script

In emotional or stressful situations, it’s easy to forget what needs to be said—especially when there are a number of issues to cover, as is usually the case in a layoff meeting. Preparing a script will help keep you on track and ensure you go over all the important points. If you need a sample script, download Intoo’s Layoff Notification Guide and customize it to fit your company’s needs.


Step 5. Gather the Materials

Many states have laws on how to lay off an employee. Some require that you provide departing employees with final paychecks on their last day of work; others require that you compensate departing employees for unused vacation or sick time. Check your state laws, and prepare that final check or know when and how it will be provided to the employee.

Other items you may need are a layoff notice letter, an employee separation agreement, and information about outplacement services and other benefits you’re offering the departing employee. Read on for more details on those items.


Step 6. Hold the Meeting

With all the steps on how to lay off an employee that you’ve followed so far, you should be well prepared for the actual termination meeting. During that event, it’s important to focus on the employee to respond compassionately and appropriately to whatever emotions may come up, whether it’s shame, anger, or sadness.

Intoo’s webinar—Compassionate Offboarding: How to Manage Layoffs with Empathy and Dignity—covers how to manage a layoff meeting with empathy and dignity. Watch the webinar for the details, including on what to say—and not to say—during an offboarding meeting.

After you’ve given the employee the news, you can give them your prepared materials, like the notice of layoff and final paycheck. You can also request that the employee return to you any company property, such as laptops and keys, in their possession.


Step 7. Present the Employee Separation Agreement

Many companies ask employees to sign a separation agreement at the time of a layoff. This legal document stipulates that the employee waive their right to sue for wrongful termination. Employees might ask for time to look over and think about the separation agreement; allow them the time to do so, but do give them a deadline. If the employee is over 40, you must give them at least 21 days to review an offer if they were terminated individually—or 45 days if terminated as part of a larger layoff.

Often, employees are motivated to sign a separation agreement in exchange for receiving a severance package, which is why it’s helpful to create an attractive severance package when following industry best practices on how to lay off an employee.


Step 8. Offer a Severance Package

A severance package usually includes severance pay, which usually takes into account the number of years the employee has worked for the company and the employee’s seniority level. The package may also include continuation of health benefits, stock options, contributions to retirement savings, or other perks.

Severance packages are not required by law, but are often employed by companies to reduce the risk of litigation and to promote goodwill.


Step 9. Provide Outplacement

Employers concerned about brand management often provide outplacement services to departing employees. Outplacement consists of career transition assistance such as career coaching and resume reviews, which help exiting employees find new jobs more quickly and easily.

Beyond allowing companies to reduce the cost of unemployment claims and protect brand reputation, outplacement programs also allow for a more positive offboarding experience for the exiting employee. Even though employees are rarely happy about being laid off, they are more likely to believe that their company values them and cares about their well-being if they’re provided with honest business reasons as to why the layoff is taking place, and given tangible assistance with making the next step in their careers. This is why engaging outplacement services is considered an industry best practice when planning how to lay off an employee.


While it can be tempting to avoid talking about how to lay off an employee, preparing for reductions in force allows you to follow best practices, creating a more positive process for everyone involved.

For companies who want to create positive offboarding experiences, Intoo can help. Intoo’s outplacement solution offers one-on-one, on-demand coaching from premier career counselors, resume reviews, video interview coaching, and many other career tools and benefits, all on a convenient virtual platform. Learn more about how our outplacement services can support your offboarding process.


INTOO Staff Writer

INTOO staff writers come from diverse backgrounds and have extensive experience writing about topics that matter to the HR and business communities, including outplacement, layoffs, career development, internal mobility, candidate experience, succession planning, talent acquisition, and more.

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