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CHAPTER SIX CHAPTER SIX

Managing Employee Separations, Managing Employee Separations, Downsizing and OutplacementDownsizing and Outplacement

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Chapter ObjectivesChapter Objectives

Identify the costs and benefits associated with employee separations

Understand the differences between voluntary and involuntary separations

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

Review Key TermsAttritionEmployee separationsExit interviewsHiring freeze Involuntary separation Outplace assistance Turnover rate Voluntary separation

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Key TermsKey Terms

Employee separationsThe termination of an employee’s membership in an

organization. Turnover rate

The rate of employee separations in an organization.

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Costs of Employee SeparationsCosts of Employee Separations

The costs of employee separationsThe costs of employee separations Recruitment costsRecruitment costs Selection costsSelection costs Training costsTraining costs Separation costsSeparation costs

Severance paySeverance pay Exit interviewsExit interviews Outplace assistance Outplace assistance

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Benefits of Employee SeparationsBenefits of Employee Separations

The benefits of employee separationsThe benefits of employee separationsReduced labor costsReduced labor costsReplacement of poor performersReplacement of poor performersIncreased innovationIncreased innovationOpportunity for greater diversityOpportunity for greater diversity

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Types of Employee SeparationTypes of Employee Separation

Voluntary separationVoluntary separation A separation that occurs when an employee decides, A separation that occurs when an employee decides,

for personal or professional reasons, to end the for personal or professional reasons, to end the relationship with the employer.relationship with the employer. Quits Retirements

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Types of Employee SeparationTypes of Employee Separation

Involuntary separationInvoluntary separation A separation that occurs when an employer decides to A separation that occurs when an employer decides to

terminate its relationship with an employee due to a poor fit terminate its relationship with an employee due to a poor fit between the employee and the organization or economic between the employee and the organization or economic necessity necessity

DischargesDischarges Occur when a firm decides there is a poor ‘fit’ between an employee and a Occur when a firm decides there is a poor ‘fit’ between an employee and a

the organization the organization Layoffs - downsizing and rightsizingLayoffs - downsizing and rightsizing

DownsizingDownsizing Strategy by a company to reduce scale and scope of its business to Strategy by a company to reduce scale and scope of its business to

improve its financial performanceimprove its financial performance RightsizingRightsizing

Reorganization of a company’s employees to improve efficiencyReorganization of a company’s employees to improve efficiency

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Alternatives to Layoffs – Early RetirementAlternatives to Layoffs – Early Retirement

Features of early retirement policiesFeatures of early retirement policies Package of financial incentives that make it attractive for Package of financial incentives that make it attractive for

senior employees to retire earlier than they had planed senior employees to retire earlier than they had planed ‘‘Open window’ that restricts eligibility to a fairly short period Open window’ that restricts eligibility to a fairly short period

of time of time Avoiding problems with early retirementsAvoiding problems with early retirements

A longtime employee who has performed satisfactorily over A longtime employee who has performed satisfactorily over many years suddenly receives an unsatisfactory performance many years suddenly receives an unsatisfactory performance evaluationevaluation

A manager indicates that senior employees who do not take A manager indicates that senior employees who do not take early retirement may lose their jobs anyway because a layoff is early retirement may lose their jobs anyway because a layoff is likely in the near futurelikely in the near future

Senior employees notice that their most recent pay raises are Senior employees notice that their most recent pay raises are quite a bit lower than those of other, younger workers who are quite a bit lower than those of other, younger workers who are not eligible for early retirement not eligible for early retirement

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Alternatives to Layoffs – Employment PoliciesAlternatives to Layoffs – Employment Policies

Attrition Attrition An employment policy designed to reduce the An employment policy designed to reduce the

company’s workforce by not refilling job company’s workforce by not refilling job vacancies that are created by turnover.vacancies that are created by turnover.

Hiring freeze Hiring freeze An employment policy designed to reduce the An employment policy designed to reduce the

company’s workforce by not hiring any new company’s workforce by not hiring any new employees into the company.employees into the company.

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Alternatives to LayoffsAlternatives to Layoffs

Changes in Job DesignReallocation and relocationBumpingJob Sharing

Pay and Benefit PoliciesPay freezesCut overtimeUse vacation time and leave daysPay cuts

Retraining

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Implementing a layoffImplementing 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.

Notifying employeesWorker Adjustment and Retraining Notification Act

of 1988 (WARN)

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Worker Adjustment and Retraining Worker Adjustment and Retraining Notification Act of 1988 (WARN)Notification Act of 1988 (WARN)

Worker Adjustment and Retraining Notification Act (1988)Employment losses covered by the law:

Terminations other than discharges for cause, voluntary departures, or retirement

Layoffs exceeding six months Reductions of more than 50% in employee’s work hours

during each month of any six-month period.

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.

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Worker Adjustment and Retraining Worker Adjustment and Retraining Notification Act of 1988 (WARN)Notification Act of 1988 (WARN)

Worker Adjustment and Retraining Notification Act (1988)

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.

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Implementing a LayoffImplementing a Layoff

Implementing a LayoffDevelop layoff criteria

Seniority vs. PerformanceCommunicating to laid-off employeesCoordinating media relationsMaintaining securityReassuring survivors of the layoffs

Survivor Anxiety More work Unsettling changes Self assessment of contributions Guilt

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OutplacementOutplacement

The Goals of Outplacement - 1. Reducing the morale problems of employees

who are about to be laid off

2. Minimizing the amount of litigation initiated by separated employees

3. Assisting separated employees in finding comparable jobs as quickly as possible

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Outplacement ServicesOutplacement Services

Emotional SupportJob-search Assistance