A layoff or downsizing is the temporary suspension or permanent termination of employment of an employee or, more commonly, a group of employees (collective layoff) for business reasons, such as personnel management or downsizing an organization. Originally, layoff referred exclusively to a temporary interruption in work, or employment but this has evolved to a permanent elimination of a position in both British and US English, requiring the addition of "temporary" to specify the original meaning of the word. A layoff is not to be confused with wrongful termination. Laid off workers or displaced workers are workers who have lost or left their jobs because their employer has closed or moved, there was insufficient work for them to do, or their position or shift was abolished (Borbely, 2011). Downsizing in a company is defined to involve the reduction of employees in a workforce. Downsizing in companies became a popular practice in the 1980s and early 1990s, since it was seen as a way to deliver better shareholder value by helping reduce the costs of employers (downsizing, 2015). Research on downsizing in the US, UK, and Japan suggests that downsizing is being regarded by management as one of the preferred routes to help declining organizations, cutting unnecessary costs, and improve organizational performance. A layoff usually occurs as a cost-cutting measure. A study of 391 downsizing announcements of the S&P 100 firms for the period 1990–2006 found that layoff announcements resulted in a substantial increase in the companies’ stock prices and that the gain was larger when the company had prior layoffs. The authors suggested that the stock price manipulation alone creates a sufficient motivation for publicly traded corporations to adopt the practice of regular layoffs.
Terminology Euphemisms are often used to "soften the blow" in the process of firing and being fired. The term "layoff" originally meant a temporary interruption in work (and usually pay). The term became a euphemism for permanent termination of employment and now usually requires the addition of "temporary" to refer to the original meaning. A number of other euphemisms have been coined for "(permanent) layoff", including "downsizing", "excess reduction", "rightsizing", "leveraging synergies", "delayering", "smartsizing", "redeployment", "workforce reduction", "workforce optimization", "simplification", "force shaping", "recussion", "manage out people", "resource action", and "reduction in force" (also called "RIF", especially in the US government employment sector). "Mass layoff" is defined by the United States Department of Labor as 50 or more workers laid off from the same company around the same time. "Attrition" implies that positions will be eliminated as workers quit or retire. "Early retirement" means workers may quit now yet still remain eligible for their retirement benefits later. "Redundancy" is a specific legal term in UK labour law with a definition in section 139 of the Employment Rights Act 1996: see Redundancy in United Kingdom law. When an employer is faced with work of a particular type ceasing or diminishing at a particular location, it may be perceived as obfuscation. Firings imply misconduct or failure while layoffs imply economic forces beyond the employer's and employees' control, especially in the face of a recession.
Common abbreviations for reduction in force RIF – A generic reduction in force, of undetermined method. Often pronounced like the word riff rather than spelled out. Sometimes used as a verb, as in "the employees were pretty heavily riffed". eRIF – Layoff notice by email. IRIF – Involuntary reduction in force – The employee(s) did not voluntarily choose to leave the company. This usually implies that the method of reduction involved either layoffs, firings, or both, but would not usually imply resignations or retirements. If the employee is fired rather than laid off, the term "with cause" may be appended to indicate that the separation was due to this employee's performance and/or behavior, rather than being financially motivated. VRIF – Voluntary reduction in force – The employee(s) did play a role in choosing to leave the company, most likely through resignation or retirement. In some instances, a company may exert pressure on an employee to make this choice, perhaps by implying that a layoff or termination would otherwise be imminent, or by offering an attractive severance or early retirement package. Conversely, the company is not obliged to accept an employee's decision and may not accept every employee who volunteers for a VRIF. WFR – Work force reduction.
In the public sector Following the 2008 financial crisis and the Great Recession, the public sector has seen significantly smaller job growth in employment versus the private sector, and layoffs have been used to ensure sustainability. As the public sector declines, the demand for services from the private sector declines as well. Layoffs in the public sector have put limitations on the growth rate of the private sector, inevitably burdening the entire flow of markets.
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