How To Decide Who To Layoff During A Restructure?

If there’s one thing we know for sure, change is inevitable in the business world. Mergers and acquisitions, divestment and spin-offs, corporate buyouts - whatever the change may be, your employees are the ones who will be most affected.

As the employer or HR leader, you play an important role in the layoff process. From carefully organizing layoff meetings to providing severance packages for affected workers, you also need to select and decide which employee to let go, which can present many emotional and technical challenges. As Forbes advises, companies should never allow employees to self-select to be laid off. If they do that, their best talents often choose to be laid off. 

To ensure a smooth and fair layout, we’ve compiled an overview of selection criteria employers can use to make deliberate and thoughtful decisions when determining who to lay off (and who to keep). However, it is important to remember that each method has shortcomings, and what applies to each company will differ. Hence, you should review each method objectively with your relevant teams and then decide based on your company’s goals.

 

#1 Seniority-based Selection

Some companies apply a strict “last hired/first fired” layoff selection policy. This selection criterion lowers the risk of your company getting sued by senior-level workers who tend to be older for unfair layoff and age-discriminatory practices. 

Nevertheless, using seniority-based selection has its downsides as well. For instance, ‘fresher’ employees that came after may possess newer or more technologically savvy skills that your company needs to thrive after the restructuring. If this is the case for your workplace, using seniority as your primary layoff selection criteria is not recommended.

 

#2 Employee Status-Based Criteria

If your company employs part-timers, contingent workers, or freelancers, you may want to consider letting these employees go first to retain your remaining full-time or core employees. 

This selection criterion would help reduce litigation and make HR paperwork much simpler. Nevertheless, some non-full-time workers may contribute more significantly to the success of your company, so you may need to use a different method if this means you would eliminate key players in your workplace. Also, suppose the majority of your workforce points to contingent workers. In that case, this selection criterion alone may not be enough to meet downsizing needs, or it may need to be used in conjunction with other selection criteria.

 

#3 Merit-Based Selection

Employers and HR leaders know this: some employees perform at higher levels than others, and these are top-performing talents that you want to keep. You may have salespeople who continuously outperform their peers in hitting targets or customer care representatives who do a great job retaining and handling customers. A merit-based layoff selection method allows you to keep these great talents while laying off those underperforming. If you choose this method, it is essential to have data or records that present these performance results to prevent potential lawsuits.

Despite being the most preferred selection criteria among managers, there are still some shortcomings, especially regarding the performance data. The collected information may not always be objective, contain rater biases, or be well-documented. 

 

#4 Skills-Based Selection

Utilizing skills-based evaluations as your selection method can help your company retain workers with the most valuable skill set after the restructuring. It enables you to individually evaluate each employee’s potential contributions and compare them against the company's needs. Forbes advises creating a list of the most important objectives for each department, then determining which employees are crucial for attaining those goals and which employees’ absence would do the least damage.

This criterion is challenging because some skill sets are hard to quantify. For instance, there may be employees with valuable connections, positive influencers in the company, or deep knowledge of your company. These ‘qualities’ may not directly complement your company’s immediate goals but may be beneficial in the long run. 

 

#5 Multiple Criteria Ranking

Although all the aforementioned methods have pros and cons, they can still prove equally effective when planned carefully. But perhaps the most effective yet difficult selection method would be combining some of the criteria mentioned above - multiple criteria ranking. Below is an example of the ranking criteria used by some companies in their selection policies, based on criteria such as seniority, skill, and merit-based factors.

• Employee's long-term potential and leadership

• Employee's skills, expertise, knowledge, and adaptability

• Employee's education and experience levels

• Employee's quality, quantity, and impact of work

• Employee's attendance history and attitude

• Employee's tenure within the company

 

For more HR-related content, visit our HR Library!