Table of Contents
- What Is a Layoff?
- Understanding Layoffs
- Layoff vs. Furlough vs. Firing
- Example of Mass Layoffs
- Layoff Statistics
- Special Considerations
- What Should You Do When You Get Laid Off?
- What Happens to Your Health Insurance When You Get Laid Off?
- How Long After Being Laid Off Can I File for Unemployment?
- What Happens to My 401(k) After a Layoff?
- Who Gets Laid Off During a Merger?
- The Bottom Line
What Is a Layoff?
Let me explain what a layoff really means. It's the involuntary termination of your job, and it's usually not because of anything you've done wrong—think cost-cutting or changes in the company structure.
You might face a layoff if the company is dealing with lower demand for its products, seasonal shutdowns, a shift in business direction, or a broader economic slump. If you're laid off, you'll lose your wages and benefits, but you can tap into government unemployment insurance for a while.
One thing you don't lose is your investments in retirement plans like a 401(k). Also, under federal law called COBRA, you can keep your company health plan going at your own cost for 18 to 36 months.
Key Takeaways
- A layoff is an involuntary job loss started by the employer, often to cut costs.
- If you're laid off, you qualify for government unemployment benefits, which isn't the case if you're fired for cause.
- Some companies offer severance pay voluntarily, based on how long you've worked there.
- Mass layoffs can hit local economies hard, especially in areas relying on one big employer or industry.
Understanding Layoffs
Layoffs usually hit groups of workers, not just one person. They're a way for companies to trim expenses during financial troubles, strategy changes, or after a sale where the new owner merges departments.
Workers hate them, no matter if the company calls it downsizing, rightsizing, or something else like workforce reduction. Sometimes, to avoid forced layoffs, companies offer buyouts or early retirement to older employees, swapping paychecks for benefits.
Here's something important: even profitable companies lay off workers to boost profits or shift operations.
Layoff vs. Furlough vs. Firing
A layoff is meant to be permanent, though sometimes companies rehire if they change their minds. A furlough is temporary, like during a short shutdown, and you might keep your title and benefits, expecting to return.
Public workers get furloughed during budget deadlocks or shutdowns—non-essential ones sit out, while essential ones work without immediate pay. Furloughed folks might get unemployment depending on state rules.
Firing happens for poor performance, wrongdoing, or breaking rules, and you usually don't get unemployment if it's for cause.
Example of Mass Layoffs
Take the early COVID-19 days: U.S. companies did mass layoffs as demand crashed from restrictions and fears, shutting down travel, restaurants, and services. In April 2020 alone, over 20 million jobs were cut, per the Bureau of Labor Statistics.
To save jobs, the government rolled out the Paycheck Protection Program, giving forgivable loans to cover payroll if businesses kept workers on.
Layoff Statistics
Layoff numbers feed into bigger employment stats like nonfarm payrolls and unemployment rates. The BLS's Job Openings and Labor Turnover Survey tracks all job separations—layoffs, quits, firings, and more—to figure out openings.
For instance, in September 2023, there were 9.6 million job openings nationwide, with little change in separations.
Special Considerations
Laid-off workers suffer the most, but it affects everyone—remaining staff, communities, the economy, and even the company. Professor Jeffrey Pfeffer from Stanford says recent tech layoffs were copycat moves that didn't help and might have cost more long-term.
Downsides include stress for all involved and worse customer service.
What Should You Do When You Get Laid Off?
First, review your employment contract and any severance offer carefully—it might include pay, benefits continuation, or health insurance. Watch for conditions like not filing for unemployment.
Negotiate if needed, and get a lawyer to check the paperwork before signing.
What Happens to Your Health Insurance When You Get Laid Off?
Your employer usually stops paying for health insurance at month's end. You can continue via COBRA for 18-36 months at the group rate, but it's pricey.
Consider Affordable Care Act plans instead—you might get subsidies while unemployed and pay little or nothing.
How Long After Being Laid Off Can I File for Unemployment?
File as soon as possible, says the Department of Labor. You need to be laid off without fault and meet wage/work requirements; states might have extras.
What Happens to My 401(k) After a Layoff?
If it's big enough, you can leave it with the old employer. Better to roll it over to a new job's plan or an IRA. Do a direct transfer to avoid taxes on the whole amount.
Who Gets Laid Off During a Merger?
Mergers often cut redundancies, hitting executives and duplicate departments like HR or payroll. It's stressful since you can't predict who goes.
The Bottom Line
Layoffs are a tough reality in competitive markets chasing profits. They hurt workers psychologically and financially, plus families, communities, and businesses.
If you're at risk, know government programs can provide income and health coverage between jobs.
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