In recent times, companies have frequently resorted to layoffs not solely for cost-cutting measures but also as a strategy to remove underperforming employees. According to a survey conducted by ResumeBuilder.com, involving 600 business leaders, around 50% acknowledged that approximately 75% of their layoffs were unnecessary for financial savings. Instead, a significant 80% admitted to using layoffs as a means to eliminate poor performers rather than directly terminating them.
This practice, however, may have unintended repercussions. Stacie Haller, Chief Career Advisor at ResumeBuilder, highlighted the potential issues with such an approach: “It’s a concerning scenario when performance-based terminations are masked as layoffs. Understanding the true reasons behind these decisions is crucial for both employees and job seekers as they navigate their careers”.
Layoffs are often preferred by companies because they are perceived to be less damaging to employee morale, help avoid wrongful termination claims, and spare employees’ feelings. Additionally, companies are employing other strategies, such as enforcing strict return-to-office policies, to encourage voluntary resignations. A separate survey by BambooHR revealed that 18% of HR professionals and 25% of VP and C-suite executives were hoping for voluntary turnover during their return-to-work initiatives.
Furthermore, the survey indicated that 37% of managers, directors, and executives believed layoffs were enacted because fewer employees quit than anticipated during the return-to-office phase. This contributes to a growing erosion of trust between employers and employees, as noted by Haller.
In terms of decision-making, about 31% of surveyed business leaders stated that performance always influences their layoff decisions, while 51% said it “often” does. Only 15% said performance sometimes plays a role, with the remainder indicating it rarely or never does. Haller pointed out that this reflects a lack of adequate manager training, emphasizing the need for managers to be trained in handling terminations legally and ethically.
When it comes to providing recommendations for laid-off workers with poor performance, 21% of business leaders were very likely to give positive recommendations, while 34% were only somewhat likely to do so.
Despite these trends, layoffs have remained relatively low and stable. Recent data from the Bureau of Labor Statistics showed job openings in June at approximately 8.2 million, consistent with the previous month but down by about 1 million from the previous year. The overall quit rate remained unchanged, and the layoff rate slightly decreased from 1.1% to about 0.9%.
Challenger Gray & Christmas Inc. reported that American companies announced 460,530 job cuts this year, marking the third-highest total since 2009. However, this figure represents a 4.4% decrease from last year.
Concerns over layoffs have been rising among workers, with a survey by Express Employment Professionals and Harris Poll indicating an increase in layoff worries from 24% in spring 2023 to 31% a year later. Additionally, ResumeBuilder.com found that when layoffs occurred, about 30% of companies replaced the workers with offshore employees, and 24% plan to do so by 2025.
The stress associated with potential layoffs can also adversely affect employees' mental health. Jeanette M. Bennett, an experimental health psychologist, explained that the persistent fear of job loss creates a detrimental feedback loop impacting both mental and physical well-being.
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