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CHAPTER SIX
Managing Employee Separations,
Downsizing and Outplacement
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Chapter 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 Terms
 Attrition
 Employee
separations
 Exit interviews
 Hiring freeze
 Involuntary separation
 Outplace assistance
 Turnover rate
 Voluntary separation
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Key Terms
 Employee
separations
 The
termination of an employee’s membership in an
organization.
 Turnover
 The
rate
rate of employee separations in an organization.
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Costs of Employee Separations
 The
costs of employee separations
 Recruitment
costs
 Selection costs
 Training costs
 Separation costs
 Severance
pay
 Exit interviews
 Outplace assistance
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Benefits of Employee Separations
 The
benefits of employee separations
Reduced labor costs
Replacement of poor performers
Increased innovation
Opportunity for greater diversity
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Types of Employee Separation
 Voluntary
separation
 A separation
that occurs when an employee decides,
for personal or professional reasons, to end the
relationship with the employer.
 Quits
 Retirements
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Types of Employee Separation

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

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

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Alternatives to Layoffs – 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


Avoiding problems with early retirements
A longtime employee who has performed satisfactorily over
many years suddenly receives an unsatisfactory performance
evaluation
 A manager indicates that senior employees who do not take
early retirement may lose their jobs anyway because a layoff is
likely in the near future
 Senior employees notice that their most recent pay raises are
quite a bit lower than those of other, younger workers who are
not eligible for early retirement

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Alternatives to Layoffs – Employment Policies
 Attrition
 An
employment policy designed to reduce the
company’s workforce by not refilling job
vacancies that are created by turnover.
 Hiring
 An
freeze
employment policy designed to reduce the
company’s workforce by not hiring any new
employees into the company.
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Alternatives to Layoffs
 Changes
in Job Design
 Reallocation
and relocation
 Bumping
 Job
 Pay
Sharing
and Benefit Policies
 Pay
freezes
 Cut overtime
 Use vacation time and leave days
 Pay cuts
 Retraining
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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.
 Notifying
employees
 Worker Adjustment
1988 (WARN)
and Retraining Notification Act of
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Worker Adjustment and Retraining
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
 One
for failing to give notice
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
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 Layoff
 Implementing
 Develop
a Layoff
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
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Outplacement
 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 Services
 Emotional
Support
 Job-search Assistance