Best Layoff Practices: Can You Lay Off and Hire at the Same Time?

What is a layoff?

Before moving forward with layoffs and potential new hires, it is important to understand what a layoff is and how it differs from other forms of employee separations.

Layoffs are generally a reduction in force. This could be just one employee or many employees at one time. Layoffs can be temporary or permanent, and they can occur across multiple departments within a business or just in one.

Performance or behavior issues with employees should not be dealt with through layoffs. This process should not be an excuse to get rid of a troubled employee.

That said, in mass layoffs it is common practice to eliminate the positions of lower-performing employees and those with behavioral issues first. Just understand that you cannot turn around and fill the same position right away with another person.

Is it legal to simultaneously lay off and hire employees?

The short answer is yes, but there are some caveats. You cannot lay off an employee in a specific position and then immediately fill that same position with a new hire. If that is the route you are looking to take, you cannot refer to that employee’s termination as a layoff. Doing so could open you up to wrongful termination lawsuits, which can be difficult to defend against.

A company can lay off and hire at the same time when these employment actions do not overlap on the same job or position. You can legally lay off and hire employees simultaneously if you are experiencing a reduction in business and no longer need an operations manager, for example, but do need to hire more sales professionals to bring in new business.

How soon can I hire a new employee to replace one I laid off?

The U.S. Department of Labor does not identify a time frame for when you can rehire for a laid-off position. However, you should still be careful if you decide to hire someone new for a position that a former employee recently held.

For example, say you are rehiring for a job within six months of your company reducing, freezing or eliminating that position, and you decide not to rehire the person you laid off from the job. Let’s also say the former employee gets word that the new employee is younger, practices a different religion or has another gender. The former employee might question the reason they were laid off and wonder if your business discriminated against them.

This may lead the former employee to seek legal counsel. If the employer cannot show why the layoff was necessary and give a clear reason for the decision not to rehire the former employee, the company may find itself in a legal dispute.

To avoid potential legal issues, it’s best to wait at least six months before filling any positions that you have frozen or eliminated — unless you decide to re-employ the person you originally laid off in the same or a similar role. 

What is the difference between being fired and laid off?

Employees who lose their job because of performance, attendance or behavioral issues are fired. Their position is not being eliminated; their employment with the company is.

When external realities cause the company to reduce its workforce in order to save money or reduce overhead, that is typically a layoff.

What’s the difference between being furloughed and laid off?

There’s a big difference between getting furloughed and being laid off. Usually, furloughed workers are still employees of the company, but are removed from the payroll as their work hours are temporarily eliminated (frozen). Most of the time, furloughed workers retain their employment rights, benefits, seniority and status within their position.

Laid-off workers are no longer employees, and lose their healthcare and retirement benefits along with their job.

Source: Workest by Zenefits

When to lay off employees

Many factors can force employers of all sizes to lay off employees.

• Economic downturns: When the entire economy shrinks or slows, companies within many industries have to come up with ways to save money. Employees are expensive, and if there are ways for a company to go without certain positions, the employees within those positions are removed from the workplace.
• Mergers and acquisitions (M&As): When two companies become one, there are almost always superfluous positions and, thus, employees left in the wake. Determining which ones to retain and which to let go is an inevitable part of mergers and acquisitions.
• Relocating or moving operations: When a business physically moves to a new facility in a distant city or different state, local employees usually won’t uproot their lives and move with the company. The lower an employee’s pay is, the less likely they are to relocate for the company.’
• Evolution, technology and automation: As technology continues to improve, it’s inevitable that certain functions employees used to perform will no longer be necessary. To limit redundant coverage, employers reduce headcount when it is no longer needed.
• Growing internationally, outsourcing or offshoring: For many reasons, mostly to save money, some employers move their operations overseas (for example, outsourcing to an offshore call center), where labor costs are far less than in the U.S. In these situations, entire plants may close down, resulting in thousands of employees being laid off at once.

Should layoffs be permanent or temporary?

Layoffs, in and of themselves, should be communicated to the employee as a permanent departure from the company. If circumstances change, you can always contact them and explain your reasons for inviting them back. Never promise future employment to anyone, however, since you cannot predict the future. More importantly, a verbal promise of employment may be considered a contract for employment in legal circles.

Should I consider rehiring laid-off employees?

Whether or not to rehire laid-off employees is mostly a matter of the employer’s judgment. If it’s been less than six months from when you laid off an employee to when you need someone in the position again, it is good practice to rehire the same employee. If the laid-off worker was a good employee overall and had a positive experience with your company, there should be no reason not to rehire them if you need that role in your company again.

How to communicate reasons for layoffs and/or simultaneous hiring

There are specific avenues you should take when communicating with the employees you are laying off, as well as when informing the rest of the company. 

Communication for exiting employees

Being laid off is never a pleasant experience, and all employers should be mindful, sensitive and patient throughout the process. Anyone in your company who will be delivering the news to laid-off employees needs to know what to include in the notification meeting and how to say it clearly and compassionately.

You, your human resources representative or the employee’s manager should address these five areas in the notification meeting with the employee:

• Explain the business rationale for the layoffs — and theirs specifically.
• Provide the employee a written letter with all the relevant information, including the effective date and an explanation of the impact on their benefits (e.g., how they will be discontinued).
• Explain the details of their severance package.
• Tell them about any outplacement services that your company or an organization in your area offers.
• Lay out their next steps, such as returning company equipment.

Communication for remaining employees

You and your leadership team should inform the remaining employees that layoffs took place and the reasons behind them. If possible, present this news in person, such as in an all-staff meeting. For large, remote or widely dispersed teams, a video conference may be appropriate.

Follow up the initial announcement with a detailed email to all employees that reinforces what was shared in the meeting. Team leaders, managers and supervisors should pull their teams together to check in, ask if there are any questions, and remind the team to practice self-care. Survivor’s guilt in the wake of layoffs is a real phenomenon that you shouldn’t ignore. Managers should acknowledge this and, if your company offers it, remind their team of your employee assistance program (EAP) services.

Consider these tips for how leaders should communicate with their remaining team members:

• Spell out the layoff processes so employees know what those who are being laid off will be experiencing and what the impact on the team will be.
• Listen to your team’s concerns, let them vent, and acknowledge their fears with compassion and authenticity.
• Describe a future vision for employees, their roles, the team and the company as a whole.

Communication for customers

You may be embarrassed or reluctant to share the news with the public, but your reduction in force could be helpful for customers to know about, particularly if it may impact their service or delivery timing. Provide your managers, sales professionals and any customer-facing staff with scripts on what to say so they are equipped to handle tough conversations.

Maintaining a healthy balance

As an employer, you never look forward to laying off any of your staff. But in the best interest of your entire company, there may be times when layoffs are necessary. 

Approaching the situation with transparency and honesty is one of the best ways you can handle layoffs. Effective communication with your employees can help you maintain positive relationships with them, which can be beneficial if you later have the resources to rehire the ones you laid off.

Additional reporting by Shayna Waltower and Max Freedman.