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CHAPTER SIX CHAPTER SIX
Managing Employee Separations, Managing Employee Separations, Downsizing and OutplacementDownsizing and Outplacement
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Chapter ObjectivesChapter 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 TermsAttritionEmployee separationsExit interviewsHiring freeze Involuntary separation Outplace assistance Turnover rate Voluntary separation
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Key TermsKey Terms
Employee separationsThe termination of an employee’s membership in an
organization. Turnover rate
The rate of employee separations in an organization.
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Costs of Employee SeparationsCosts of Employee Separations
The costs of employee separationsThe costs of employee separations Recruitment costsRecruitment costs Selection costsSelection costs Training costsTraining costs Separation costsSeparation costs
Severance paySeverance pay Exit interviewsExit interviews Outplace assistance Outplace assistance
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Benefits of Employee SeparationsBenefits of Employee Separations
The benefits of employee separationsThe benefits of employee separationsReduced labor costsReduced labor costsReplacement of poor performersReplacement of poor performersIncreased innovationIncreased innovationOpportunity for greater diversityOpportunity for greater diversity
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Types of Employee SeparationTypes of Employee Separation
Voluntary separationVoluntary separation A separation that occurs when an employee decides, A separation that occurs when an employee decides,
for personal or professional reasons, to end the for personal or professional reasons, to end the relationship with the employer.relationship with the employer. Quits Retirements
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Types of Employee SeparationTypes of Employee Separation
Involuntary separationInvoluntary separation A separation that occurs when an employer decides to A separation that occurs when an employer decides to
terminate its relationship with an employee due to a poor fit terminate its relationship with an employee due to a poor fit between the employee and the organization or economic between the employee and the organization or economic necessity necessity
DischargesDischarges Occur when a firm decides there is a poor ‘fit’ between an employee and a Occur when a firm decides there is a poor ‘fit’ between an employee and a
the organization the organization Layoffs - downsizing and rightsizingLayoffs - downsizing and rightsizing
DownsizingDownsizing Strategy by a company to reduce scale and scope of its business to Strategy by a company to reduce scale and scope of its business to
improve its financial performanceimprove its financial performance RightsizingRightsizing
Reorganization of a company’s employees to improve efficiencyReorganization of a company’s employees to improve efficiency
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Alternatives to Layoffs – Early RetirementAlternatives to Layoffs – Early Retirement
Features of early retirement policiesFeatures of early retirement policies Package of financial incentives that make it attractive for Package of financial incentives that make it attractive for
senior employees to retire earlier than they had planed senior employees to retire earlier than they had planed ‘‘Open window’ that restricts eligibility to a fairly short period Open window’ that restricts eligibility to a fairly short period
of time of time Avoiding problems with early retirementsAvoiding problems with early retirements
A longtime employee who has performed satisfactorily over A longtime employee who has performed satisfactorily over many years suddenly receives an unsatisfactory performance many years suddenly receives an unsatisfactory performance evaluationevaluation
A manager indicates that senior employees who do not take A manager indicates that senior employees who do not take early retirement may lose their jobs anyway because a layoff is early retirement may lose their jobs anyway because a layoff is likely in the near futurelikely in the near future
Senior employees notice that their most recent pay raises are Senior employees notice that their most recent pay raises are quite a bit lower than those of other, younger workers who are quite a bit lower than those of other, younger workers who are not eligible for early retirement not eligible for early retirement
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Alternatives to Layoffs – Employment PoliciesAlternatives to Layoffs – Employment Policies
Attrition Attrition An employment policy designed to reduce the An employment policy designed to reduce the
company’s workforce by not refilling job company’s workforce by not refilling job vacancies that are created by turnover.vacancies that are created by turnover.
Hiring freeze Hiring freeze An employment policy designed to reduce the An employment policy designed to reduce the
company’s workforce by not hiring any new company’s workforce by not hiring any new employees into the company.employees into the company.
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Alternatives to LayoffsAlternatives to Layoffs
Changes in Job DesignReallocation and relocationBumpingJob Sharing
Pay and Benefit PoliciesPay freezesCut overtimeUse vacation time and leave daysPay cuts
Retraining
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Implementing a layoffImplementing 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 employeesWorker Adjustment and Retraining Notification Act
of 1988 (WARN)
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Worker Adjustment and Retraining Worker Adjustment and Retraining Notification Act of 1988 (WARN)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 for failing to give notice One 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 Worker Adjustment and Retraining Notification Act of 1988 (WARN)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 LayoffImplementing a Layoff
Implementing a LayoffDevelop layoff criteria
Seniority vs. PerformanceCommunicating to laid-off employeesCoordinating media relationsMaintaining securityReassuring survivors of the layoffs
Survivor Anxiety More work Unsettling changes Self assessment of contributions Guilt
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OutplacementOutplacement
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 ServicesOutplacement Services
Emotional SupportJob-search Assistance