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How to lay off employees as a small business owner

If you own a small business, you must have grown close to your employees. As there are few people who work for you, you naturally become attached to them. In times of financial difficulty or if you are planning a change in your business, where some of your employees would not be needed, then you have to lay them off. It will be a tough situation for your employees, as they would become unemployed. Here are a few tips on how to lay off employees in the best way possible:

Review the lay off


If you’re in a small business, there would be budget cuts sometimes, as the big order that you were expecting did not come through. Sometimes you may have to lay off family members or a friend which makes the situation trickier. It’s crucial to review whether the layoff is truly required or not, or is it an impulsive decision.

Check to see if the decision to lay off employees is necessary. Maybe you could assign them other responsibilities with less pay. Make sure that the decision to let go of some of your employees is well thought out.

Compassion is key


While communicating layoffs in a small business, you must be compassionate. Losing a job is emotionally and financially devastating, especially for those employees who have worked sincerely for you. You must make the effort to do everything possible to smooth the process.

If you can afford it, offer severance pay when you lay off employees, so that your employee can survive while finding another job.

Usually, in times of economic downturns, people are laid off according to seniority, i.e. the employees who have the highest salaries, or the newest employees. Whoever it is you have to say good bye to, due to whatever the criteria, the process of communicating layoffs has to be sympathetic and gentle.

Honesty is the best policy


Be honest about the reason for layoff. The reason might be poor performance, poor hiring judgment on your part, financial reasons, absenteeism, etc. If it is because of poor performance, then the employee needs to know where, when and how he went wrong, which might help him do better in another job. He might realize that he is best suited for another kind of job, according to his skills and qualification.

If you have to lay off employees due to financial constraints, let the employees know that, rather than putting the blame on them. The criteria could be anything, but you ought to be honest, so that your employees can handle the layoff in a stronger manner.

Be honest with rest of your staff, as to whether would be any further layoffs. You have nothing to fear that you would be swamped with resignations of employees who found other jobs, if they see that you have helped the ones you laid off get employed again. Some companies retrain and enhance the skills of laid off employees, helping them to find their feet in a competitive job market.

Offer help

Offer helpIf three months’ severance pay is beyond your capacity at the moment, then offer to help in other ways. Give them good references which would help them get good jobs in other companies. Praise their accomplishments which would be of great help during their job search, and help to keep their morale high. You might try to place them in bigger companies, give them counseling help or put them in touch with job consultants.

Be quick


Though you have to be compassionate, when you lay off employees, you have to look out for the security and safety of your business. Keeping this in mind, you have to ask them to collect their things that very day. Some employees might bear grudges and sabotage your computers and other material, and some might react violently out of sheer shock. It will be sad for most employees to know that they are being let go, but spending more time in the office may be even more disconcerting, as they would have to spend time with those who still have their jobs.

Choose the right day

work on the weekend

Friday is considered to be a better day in the week for dismissals. This will give time for the employee to absorb the shock over the weekend. They would have to share the news with their family too, who would also be able to handle the news better when they do not have to work on the weekend. The employee may be able to strategize his next move on the following Monday, and without losing time, look for another opportunity.

Never show anger

Angry boss

Good reputation you have built is a priceless asset for your business. If you are angry (maybe justifiably so!), you should never be angry while dismissing someone, or show your disappointment. Some global giants have found the hard way that employees who were unhappy with their inhumane termination, expressed their anger on the net, leading to huge financial losses. As you are a small company, you may find it harder to recoup from any loss of business due to disgruntled employees.

Keep a control over your anger, and all other negative emotions associated with it. Always control what you say, or else you may be embroiled in a legal lawsuit later. Even if the employee may be responsible for his/her termination, you should maintain your composure and bid a polite but firm farewell. A harsh send-off will create bad memories for your employee, who may retaliate by leaving poor reviews about you.

So, if you cannot give glowing references when you lay off employees, at least write a good reference for him/her.

Do not oppose unemployment

Do not oppose unemployment

If the decision to lay off employees was a business decision, and had no bearing on the employee’s performance, then you should not make the dismissals look like behavioral issues, even though you may have to pay more unemployment tax.

Do not ignore your emotions – you may be feeling sad, disturbed, conflicted, confused. If you have made the decision to let go due to strong reasons, then you should not feel any guilt, though you would feel sad. Providing ex-employees support and encouraging them to stay in touch on a personal basis would help to make the process easier for all involved.


Dr Prem Jagyasi (c)

Dr Prem is an award winning strategic leader, renowned author, publisher and highly acclaimed global speaker. Aside from publishing a bevy of life improvement guides, Dr Prem runs a network of 50 niche websites that attracts millions of readers across the globe. Thus far, Dr Prem has traveled to more than 40 countries, addressed numerous international conferences and offered his expert training and consultancy services to more than 150 international organizations. He also owns and leads a web services and technology business, supervised and managed by his eminent team. Dr Prem further takes great delight in travel photography.

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