How do companies choose who to layoff?
Asked by: Domingo Walsh I | Last update: May 26, 2026Score: 4.9/5 (41 votes)
Companies decide who to lay off by using a mix of objective and subjective criteria, often involving performance, skills, seniority, and strategic needs, with leaders setting targets and managers identifying individuals, followed by HR reviewing for legal compliance, focusing on skills alignment, low performers, or recent hires to meet cost-cutting goals or restructure for future strategy.
How do companies decide who to retrench?
If employees are selected in terms of unfair criteria their dismissals with be considered unfair. The most commonly used and often preferred selection criterion when retrenching employees is the last in first out (“LIFO”) principle. The Labour Court has consistently accepted the LIFO criterion as fair.
Why do high performers get laid off?
Top performers get laid off all the time. In most instances, companies will let go teams based on skill sets needed in that moment, not because employees weren't demonstrating the skills they were initially hired for.
What is the rule of 70 for layoffs?
The "Rule of 70" in layoffs isn't a legal requirement but a common informal guideline for enhanced severance, where an employee's age plus years of service equals 70 or more (often with an age minimum like 55), triggering special, more generous benefits like extended healthcare or increased pay, especially when age discrimination concerns arise during large workforce reductions. While companies aren't forced to offer it, they often do to minimize age discrimination risks, particularly under laws like the ADEA for workers over 40.
Do layoffs go by seniority?
Normally, layoffs are in seniority order regardless of time base; that is, the least senior employees, regardless of whether they are part time, intermittent, or full time, are laid off first.
How Do Companies Decide Which Employees To Lay Off?
Who is usually the first to get laid off?
Nonessential teams or high-cost departments may be targeted first. But in today's world, almost any function can be outsourced. Sales and marketing jobs often survive longer because they bring in revenue. Research and development is also protected from any layoffs, since it supports long-term growth.
What is the 3 month rule in a job?
The "3-month rule" in a job generally refers to the initial probationary period where both employer and employee assess the fit, or the idea that an employee should stay at least three months before leaving for a more realistic evaluation of the role and company culture, often using a 30-60-90 day plan to set goals for learning and integration. It's a crucial time for an employee to learn processes, team dynamics, and tools, while the employer evaluates performance and potential for long-term success, notes Frontline Source Group, DEV Community, Talent Management Institute (TMI), and SEEK.
Who gets let go first during layoffs?
When layoffs occur, newer employees (Last In, First Out or LIFO) often go first, but companies also target those with redundant or obsolete skills, lower performance, or high salaries, and positions that are no longer strategically vital, especially in non-revenue-generating departments like overhead, marketing, or tech support. Decisions balance seniority, skills for future needs, and cost, meaning sometimes top earners or those lacking AI skills are cut, contrary to just seniority.
What is typical severance pay for layoff?
Many employers use a simple rule of thumb: one to two weeks' pay for every year of service. Some companies offer more, however, particularly for more senior roles or for long service. Severance can come as a lump sum or installments, sometimes with extras like health coverage or outplacement services.
What are the red flags in a severance agreement?
Major red flags in severance agreements include pressure to sign immediately, overly broad non-compete/non-disclosure clauses, waiving significant legal rights (like harassment claims), vague language, inadequate compensation (less than legally owed), one-sided non-disparagement, and clauses requiring repayment of severance. Always get legal review for these documents, as they are drafted by the company's lawyers to limit their liability, not protect you.
What is the #1 reason people get fired?
The #1 reason employees get fired is poor work performance or incompetence, encompassing failure to meet standards, low productivity, mistakes, and missing deadlines, often after warnings and performance improvement plans; however, attitude, chronic absenteeism/tardiness, misconduct, insubordination, and policy violations are also top reasons.
What is the biggest red flag at work?
The biggest red flags at work often center on poor leadership, toxic culture, and lack of transparency, manifesting as micromanagement, high turnover, vague expectations, unfair treatment, or a breakdown in communication, all signaling deeper issues with management or company health that can lead to burnout and resentment.
Is 2025 the worst year for layoffs?
2025 was a brutal year for layoffs. Even perceived winners in the AI-fueled economy, like Meta, announced workforce reductions.
Who is most likely to be laid off in a company?
Employees most likely to be laid off are often new hires, those with high salaries, roles lacking AI/tech skills, or in non-revenue generating departments, while contractors and those in vulnerable industries (like tech, construction, arts) face higher risk due to factors like lower company loyalty, redundancy, or shifting business priorities towards revenue-generating projects.
Is it better to be retrenched or resign?
Theoretically, it's better if you resign because it shows that the decision was yours and not your company's. However, if you leave voluntarily, you may not be entitled to the type of unemployment compensation you could receive if you were fired or laid off.
How much severance pay after 5 years?
If you have worked for less than 10 years, your basic severance pay is calculated as one week of pay for each year of service. Example: If you have worked for 8 years, your basic severance pay will be 8 weeks of your weekly rate.
What is the rule of 70 in severance?
The "Rule of 70" in severance refers to a guideline where an employee's age plus their years of service (e.g., 50 years old + 20 years of service = 70) qualifies them for enhanced severance benefits, often tied to extended pay, healthcare, or other perks, especially in voluntary redundancy programs, to support older, long-term employees during layoffs, though it's a common practice, not a strict legal requirement for all private companies. It's a way for companies to reward loyalty and ease transitions for older workers facing termination.
Is severance pay taxed at 40%?
The federal supplemental wage withholding rate is generally 22% for severance under $1 million, but depending on your income level for the year, that may not fully cover your tax liability. You might need to set aside extra cash from your payment to cover the full tax.
Is severance pay your final paycheck?
Severance Pay (if applicable) – While not legally required unless stipulated in a contract or collective bargaining agreement, severance payments may, if applicable, be included in the final check. Note that some states consider severance payments to be an offset to the employee's unemployment compensation.
Do good employees get laid off?
High performers are not necessarily safe from layoffs. The misconception that job performance is a shield against layoffs can often be misleading for high performers. As mentioned earlier, the need for swift budget cuts may lead to layoffs where even the best employees have to be let go.
What is the 3 month rule for jobs?
The "3-month rule" in jobs usually refers to a probationary period, a standard trial phase (often 90 days) where employers assess a new hire's performance, skills, and cultural fit before granting permanent status, with easier termination for both parties during this time. It also signifies a common benchmark for new employees to feel truly productive and settled, understanding new tools, teams, and company dynamics. It allows companies to evaluate fit and employees to learn the ropes, often impacting benefits eligibility and job security until completed.
What are signs a layoff is coming?
One telltale sign is unusual manager behavior. Many frontline managers learn about upcoming layoffs a few weeks in advance. As a result, they might become cagey or anxious in their interactions with their teams. You might observe your boss suddenly avoiding long-term topics in one-on-one meetings.
What is the 70 rule of hiring?
The 70% rule of hiring is a guideline suggesting you should apply for jobs or hire candidates who meet 70-80% of the listed requirements, focusing on potential and trainability for the missing 20-30% rather than seeking a perfect 100% match, which rarely exists and can lead to missed opportunities. It encourages hiring managers to look for transferable skills, eagerness to learn, and fresh perspectives, while candidates are advised to apply if they have most core qualifications, letting the employer decide on the gaps.
How long is too long to stay at a job?
If you stay at a job less than two years, you might be seen as a job-hopper who could be aimless, difficult to work with or chasing the highest salary offer. If you stay more than 10 years in the same position, recruiters might question why you weren't promoted or if you're motivated to learn new ways of doing things.
What is the 30 60 90 rule for a new job?
The 30-60-90 day rule for a new job is a strategic plan breaking the first three months into phases: Days 1-30 focus on learning the company, team, and tools; Days 31-60 involve contributing and applying knowledge, taking on more responsibility; and Days 61-90 focus on driving results, taking initiative, and becoming independent. This structured approach helps new hires set goals, align with company objectives, and demonstrate early success, ensuring a smooth transition.