1. Managing Employee Separations, Downsizing, and Outplacement

2. In This Section…
Identify the costs and benefits associated with employee separations
Understand the differences between voluntary and involuntary separation
Avoid problems in the design of early retirement policies
Design HRM policies for downsizing that are alternatives to layoffs and develop a layoff program that is effective and fair
Understand the value of outplacement services

3. What Are Employee Separations?
When an employee ceases to be a member of an organization
Turnover rate
The rate of employee separations in an organization
Annualized Turnover Rate = (# EE’s Leaving / Average #EE’s) X (12 / # months in period)

4. What Are Employee Separations? (Cont.)
The costs of employee separations:
Recruitment costs
Selection costs
Training costs
Separation costs
Severance pay
Exit interviews
Outplace assistance

5. What Are Employee Separations? (Cont.)
The benefits of employee separations:
Reduced labor costs
Replacement of poor performers
Increased innovation
Opportunity for greater diversity

6. Types of Employee Separations
Voluntary separation:
A separation that occurs when an employee decides, for personal or professional reasons, to end the relationship with the employer
Quits
Retirements

7. Types of Employee Separations (Cont.)
Involuntary Separation:
A separation that occurs when an employer decides to terminate its relationship with an employee due to a poor fit between the employee and the organization or economic necessity

8. Types of Employee Separations (Cont.)
Types of Involuntary Separations:
Discharges:
Occur when a firm decides there is a poor ‘fit’ between an employee and a the organization
Layoffs - Downsizing and Rightsizing:
Downsizing:
Strategy by a company to reduce scale and scope of its business to improve its financial performance
Rightsizing:
Reorganization of a company’s employees to improve efficiency

9. Managing Early Retirement
Features of Early Retirement Policies:
Package of financial incentives that make it attractive for senior employees to retire earlier than they had planed
‘Open window’ that restricts eligibility to a fairly short period of time

10. Managing Early Retirement (Cont.)
Avoiding Problems with Early Retirement Policies:
Too many employees may take the offer:
Restrict eligibility to only redundant employees in redundant departments
Ask employees ahead of time if they are interested
Employees may perceive being forced to leave (could file ADEA claims):
Make certain they are not treated differently

11. Alternatives to Layoff: Attrition:
Managing Layoffs
Alternatives to Layoff:
Attrition:
An employment policy designed to reduce the company’s workforce by not refilling job vacancies that are created by turnover
Hiring Freeze:
An employment policy designed to reduce the company’s workforce by not hiring any new employees into the company.

12. Managing Layoffs (Cont.)
Alternatives to Layoff:
Employment Policies:
Decrease number of hours worked, workweek
Encourage workers to take unpaid leaves
Fill any increase in labor demand with temporary workers

13. Managing Layoffs (Cont.)
Alternatives to Layoff:
Changes in Job Design:
Reallocation and relocation
Bumping
Job Sharing
Pay and Benefit Policies:
Pay freezes
Cut overtime
Use vacation time and leave days
Pay cuts

14. Managing Layoffs (Cont.)
Implementing a Layoff:
Layoff :
The elimination of jobs, often without regard to employee performance, usually when a company is experiencing financial difficulties. Also may occur if a company is changing its corporate strategies.

15. Managing Layoffs (Cont.)
Implementing a Layoff:
Worker Adjustment and Retraining Notification Act (1988) (WARN):
Requires employers of 100 or more employees to give 60 days’ notice before closing a facility or starting a layoff of 50 people or more
The law does not prevent the employer from closing down, nor does it require saving jobs
The law is intended to give employees time to seek other work or retraining by giving them advance notice of the shutdown
Penalty for failing to give notice - one day’s pay and benefits to each employee for each day’s notice that should have been given, up to 60 days

16. Managing Layoffs (Cont.)
Implementing a Layoff
Develop layoff criteria
Seniority vs. Performance
Communicating to laid-off employees
Coordinating media relations
Maintaining security
Reassuring survivors of the layoffs
Survivor Anxiety
More work
Unsettling changes
Self assessment of contributions
Guilt

17. Outplacement The Goals of Outplacement:
Reducing the morale problems of employees who are about to be laid off
Minimizing the amount of litigation initiated by separated employees
Assisting separated employees in finding comparable jobs as quickly as possible
Outplacement Services:
Emotional support
Job-search assistance