Layoff

Reviewed by Komal | Updated on Sep 28, 2020

What is a Layoff?

A layoff defines an employer's act of either temporarily or permanently dismissing or firing a worker for reasons other than the actual performance of an employee. A layoff is not the same as an outright dismissal, which may result from inefficiency, malfeasance or violation of duty on the part of the staff.

A layoff was intended in its original sense to denote a temporary disruption of the job, but over time the term has evolved to reflect a permanent loss of work.

A layoff will happen to a displaced worker whose job has been removed because an employer has shut down or relocated his operation. A worker can also be replaced due to a slowdown or discontinuance of production.

Understanding Layoffs

Layoffs may occur in both the public and private sectors, for a variety of reasons that can impact a person or a group of employees. Typically, in an attempt to raise the shareholder interest, layoffs are undertaken to minimise wage expenses.

Layoffs may occur when the strategic business priorities or processes of an organisation shift, despite declining sales, automation adoption, or offshoring or outsourcing.

Effects of Layoffs on Human Psychology

Though employees are bearing the brunt of layoffs with lost salaries and economic instability, the consequences of layoffs are felt in local and national economies as well. These also affect the employees who remain working, despite these cuts in the workforce.

For instance, staff who have experienced the laying off of their colleagues experience greater anxiety and higher worries about their own job security. This also contributes to decreased morale and turnover of workers.

Employees who have been subjected to a layoff will often feel a degree of mistrust for potential employers, which is why certain businesses will choose to lay off many employees at once to ease the psychological blow and ensure that staff do not feel singled out.

Mass layoffs can have a significant impact on a city or region's economy and tax base and can cause a ripple effect across a nation across related industries.