There’s an ethical way to handle layoffs. Hint: It emphasizes learning and career mobility

Both the economy and uncertainty about it are running hot. Companies shouldn’t wait until a crisis to start thinking about layoffs and how they might help employees land on their feet, writes Cat Ward of JFF.

Call it a tale of two labor markets. While major tech companies are laying off workers at a rate even faster than during the COVID-19 pandemic, the overall unemployment rate is now at its lowest since 1969. At the same time, the U.S. Federal Reserve is still working to cool inflation and turmoil in the banking system has heightened concerns about a looming economic recession. 

Cat Ward, vice president of employer mobilization at JFF

With the economic Magic 8-Ball seemingly broken, employers may find it tempting to sit back and wait to see what the future has in store. But companies would be wise to not wait for a crisis to begin building talent strategies that do best by both people and the business through the inevitable ebbs and flows of the economy. And that means actively preparing your employees and your enterprise for what no business ever hopes to face: downsizing and layoffs. 

Because when such an event does arrive, the impact on a company and the lives of its employees can be disastrous. This is especially true for frontline workers in healthcare, food service, manufacturing, and other essential industries; part-time workers and contractors; and workers of color, who are overrepresented in frontline occupations. 

With this in mind, companies should take steps now to craft a plan they hope they’ll never have to use: one for “ethically offboarding” their employees and reducing as much harm as possible—both to their workers and the health of their businesses. Here’s how. 

Build an agile talent strategy that emphasizes learning and development. A more ethical and socially conscious approach to offboarding can’t be bolted on. It has to start well before layoffs are the necessary option. Companies have an obligation to think about how they can proactively build the infrastructure to support employees if and when they go through this transition. For example, companies can bolster the long-term career prospects of employees by investing in ongoing career development and a culture of continuous learning. This means helping workers develop skills that are in demand in fast-growing sectors of the economy, allowing them to pursue other higher-paying, secure career opportunities within their existing organizations—or even elsewhere. 

A growing number of companies, including Amazon, Target, and Disney now provide robust “education as a benefit” programs, using tax-advantaged tuition reimbursement programs or other services to help workers pay for education, training, and upskilling. Such benefits aren’t just a perk for current employees; they are a strategic resource that can be used to help prepare workers for the steps in their next careers, internally or with another employer. 

Offering training and “outskilling” resources also ensure that companies have the workforces they need to remain competitive in today’s ever-evolving economy. Disney, for example, has continued to invest in its education benefits despite—or better yet, because of—major shifts in its business and layoffs.

Address the emotional costs of layoffs. Layoffs are always disruptive and often traumatic experiences for employees. The process can be immensely harmful to a company’s morale, culture, and reputation. Reducing the financial and emotional costs is essential. Companies should offer holistic severance packages that include both severance pay and additional support, such as allowing employees to keep health and education benefits for a period of time and hardware like computers and phones, which are crucial during a job search. Companies can encourage voluntary terminations by offering buyout packages to targeted groups of willing employees, limiting the number of less-prepared workers who are involuntarily laid off.

In addition, leaders should be direct and candid, clearly explaining the business drivers behind the layoffs—and showing appreciation for the work of departing employees. This is critical not only for preserving the reputation of a company but for ensuring employees can move on to new opportunities with more energy and enthusiasm. Companies like Stripe and Cameo have recently demonstrated how to navigate this challenge, communicating clearly, owning their mistakes, and offering direct recommendations and assistance.

Help displaced workers land on their feet. Employers can proactively help terminated workers quickly find new meaningful and high-paying work. Companies should work with local workforce development boards, community colleges, and nonprofits to ensure that terminated employees have access to reskilling and job placement opportunities. They should leverage their alumni networks and work to provide meaningful references. When terminated employees can rely on former coworkers and managers for references, they can more easily promote their knowledge, skills, and abilities to prospective employers and land new jobs much more quickly.

Nokia’s Bridge program provides a great example of how to help displaced workers land on their feet. Departing employees can choose from one of five “Bridge” paths: finding another job at Nokia, finding a job outside of Nokia, starting a business, learning a skill, or finding a different path. When Nokia faced a round of devastating layoffs a decade ago, this program helped 60 percent of the 18,000 laid-off employees identify their next steps.

By putting people and their needs at the center of these painful company transitions, companies can mitigate the costs, lost productivity, and reputational damage often associated with layoffs. A business that treats its people with respect and provides support and resources during the most difficult of circumstances sends a positive message to its remaining workforce, its future employees—as well as prospective customers, clients, and business partners. 

Ethical offboarding is not an oxymoron. It’s not only the right thing to do: it’s a business imperative.

Cat Ward is vice president of employer mobilization at Jobs for the Future and co-author of the group’s recent report, “A Better Approach to Layoffs.”

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