How to conduct layoffs: a fair, legal and humane process

A step-by-step guide for US employers planning layoffs: alternatives to consider first, WARN Act and state notice rules, choosing selection criteria, reviewing for discrimination risk, severance and releases, final pay and benefits, the notification meeting, supporting remaining employees and rehiring later.

In shortTo conduct layoffs well, first consider alternatives such as reduced hours or hiring freezes. If layoffs are necessary, check whether the federal WARN Act or a state law requires advance notice, set objective selection criteria tied to business needs, review the selections for discrimination risk, plan final pay, benefits continuation and any severance, and prepare clear communication. Notify affected employees in private, respectful meetings, then speak to remaining employees the same day about what happens next. Careful planning protects the business legally and helps keep the trust of the people who stay.

Layoffs vs terminations

A layoff ends employment for business reasons, such as lower demand, lost contracts, restructuring or closing a location, rather than because of the employee’s performance or conduct. Some layoffs are temporary furloughs with an expected return date. Others are permanent position eliminations. Because layoffs often affect several people at once, they bring specific legal requirements and a higher risk that selection decisions will be challenged. For individual terminations for cause, see how to fire an employee.

Consider alternatives first

Alternatives to layoffs
Option Considerations
Hiring freeze Lets attrition reduce headcount gradually
Cutting overtime and temporary labor Protects core employees first
Reduced hours or schedules Spreads the impact; check exempt salary rules and unemployment options such as work-sharing programs in some states
Voluntary unpaid time off Works when some employees welcome time off
Temporary furlough Keeps people attached for a return; benefits and pay rules apply
Redeployment Move people to roles or locations that need staff
Voluntary separation offers Lets people choose to leave with a package; review legal requirements

Alternatives can preserve skills and morale and avoid rehiring costs when demand returns. Look at overtime and scheduling data to see where hours can be reduced first. See how to reduce overtime costs.

Check notice requirements

The federal Worker Adjustment and Retraining Notification (WARN) Act generally applies to employers with 100 or more employees (excluding part-time employees) and requires 60 days’ written notice before a covered plant closing or mass layoff. In general terms, a plant closing involves 50 or more employees losing their jobs at a single site, and a mass layoff involves 500 or more employees, or 50 to 499 employees if they make up at least a third of the workforce at the site. The definitions, counting rules and exceptions are detailed, so get legal advice.

Several states have their own mini-WARN laws with lower thresholds, longer notice periods or severance requirements, including California, New York, New Jersey and Illinois, among others. Check every state where affected employees work. See temporary business closure guide.

Set objective selection criteria

Decide which positions or employees are affected using criteria tied to the business reason, written down before names are chosen.

Common selection approaches
Approach Notes
Eliminate specific roles or functions Clear when work is no longer needed
Close a location, shift or department Clear but may trigger notice rules
Performance-based Must rely on documented, consistent performance records
Skills needed for the future Define skills objectively
Seniority Simple and transparent; may be required by a union contract
Combination with a scoring matrix Weight criteria and score consistently
Example scoring matrix (fictional): A distribution center must reduce its night shift by 8 of 30 pickers. Criteria: certified on forklift and reach truck (30%), last two performance reviews (30%), attendance record (20%), seniority (20%). Two managers score each employee independently using records, then compare and resolve differences. HR reviews the result before decisions are final.

Review for discrimination risk

Before finalizing, analyze whether the selected group is disproportionately made up of people in protected groups, such as employees 40 and older, women, a particular race or ethnicity, employees with disabilities or employees who recently took leave or made complaints. If it is, revisit the criteria and decisions with legal counsel. For employees 40 and older, if you ask them to sign a release of age discrimination claims as part of a group layoff, federal law requires specific disclosures and timing.

Plan pay, benefits and severance

Prepare communication

The notification meeting

  1. Meet privately and in person where possible, or by video for remote employees. Avoid mass emails.
  2. Be direct: “Because of [business reason], your position is being eliminated, and your last day will be [date].”
  3. Explain it is a business decision, not about the person’s worth, but do not overexplain or debate the selection.
  4. Walk through the packet: final pay, benefits, severance and deadlines.
  5. Offer support: references where appropriate, outplacement if offered and information about rehire eligibility.
  6. Plan access and property respectfully; avoid public escorts where not necessary.
Sample opening (fictional): “Thank you for meeting with me. I have difficult news. Because we lost the Riverside contract, we are reducing the night shift, and your position is one of those being eliminated. Your last day will be Friday, June 14. This is not a reflection of your work. I want to walk you through your final pay, benefits and the severance package we are offering, and answer your questions.”

Support the people who stay

Remaining employees often feel anxious, guilty or overloaded. Address them the same day. Explain what happened and why, what it means for their roles and schedules, whether more cuts are expected (be honest if you do not know) and how work will be redistributed. Managers should check in individually over the following weeks. Watch for overtime and burnout among those covering extra work. See the employee burnout guide.

Rehiring later

If business recovers, former employees can be valuable rehires: they know the work and need less training. Keep records of who was laid off and their eligibility for rehire, stay in touch where appropriate and be consistent in how you offer positions back. Some state and local laws give laid-off employees in certain industries recall rights.

A layoff planning timeline

Timeline (example)
When Actions
8 to 12 weeks before Confirm business need, consider alternatives, involve legal counsel, check WARN and state rules
6 to 8 weeks before Set criteria, score employees, review for adverse impact
60 days or more before (if required) Issue WARN or state notices
2 to 4 weeks before Prepare packets, final pay, severance, scripts and communication plan
Notification day Hold meetings, address remaining staff, inform customers as needed
After Process final pay and benefits, support remaining team, track rehire eligibility

Common mistakes

Example (fictional)

A regional cleaning company lost two large commercial contracts and needed to reduce its evening crews by 15 people. It first cut overtime and paused hiring, which saved four positions. For the remaining reductions, it used a written matrix based on client-site certifications, attendance records and seniority, scored by two managers. HR reviewed the results for adverse impact. Each employee received a private meeting, a packet with final pay on the state deadline, two weeks of severance in exchange for a release and priority for rehire. Remaining crews met the same afternoon to review new routes. Six months later, the company rehired several people when a new contract started.

How EZTime helps

EZTime helps employers plan and carry out workforce changes with accurate data. Hours and overtime by department and location show where reductions are possible, schedules can be rebuilt quickly for the remaining team, final hours export to payroll-ready reports, the HR module tracks offboarding steps and announcements keep remaining employees informed.

Frequently asked questions

What is the WARN Act?

A federal law that generally requires employers with 100 or more employees to give 60 days’ written notice before covered plant closings and mass layoffs. Several states have their own versions.

How do you decide who to lay off?

Set objective criteria tied to the business reason, such as eliminated roles, skills, documented performance or seniority, score consistently and review for discrimination risk.

Do you have to give severance pay?

Federal law does not generally require it, but some states, contracts or policies may. Many employers offer severance in exchange for a signed release.

What should I say when laying off an employee?

Be direct about the decision and business reason, explain that it is not about the person’s worth, cover the last day, final pay, benefits and severance, and answer questions respectfully.

How do you support employees who remain after layoffs?

Talk to them the same day, explain what happened and what changes, be honest about uncertainty, redistribute work carefully and check in individually.

Where to go next

Keep reading

See where hours can be reduced first

EZTime shows hours and overtime by department and location and rebuilds schedules quickly.

Disclaimer: This guide is general information, not legal advice. Layoff notice, final pay, severance, benefits continuation, unemployment and anti-discrimination rules vary by state and employer size and are complex. Consult a qualified employment attorney before planning layoffs.