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CHAPTER SIX

Managing Employee Separations, Downsizing and Outplacement

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Chapter 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 Terms

Attrition Employee

separations Exit interviews Hiring freeze Involuntary separation Outplace assistance Turnover rate Voluntary separation

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Key Terms
Employee
The

separations

termination of an employees membership in an organization.

Turnover
The

rate

rate of employee separations in an organization.

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Costs of Employee Separations


The

costs of employee separations

Recruitment

costs Selection costs Training costs Separation costs


Severance

pay Exit interviews Outplace assistance

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Benefits of Employee Separations


The

benefits of employee separations Reduced labor costs Replacement of poor performers Increased innovation Opportunity for greater diversity

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Types of Employee Separation


Voluntary
A

separation

separation that occurs when an employee decides, for personal or professional reasons, to end the relationship with the employer.
Quits Retirements

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Types of Employee Separation

Involuntary separation

A separation that occurs when an employer decides to terminate its relationship with an employee due to a poor fit between the employee and the organization or economic necessity

Discharges
Occur

when a firm decides there is a poor fit between an employee and a the organization

Layoffs - downsizing and rightsizing


Downsizing

Strategy by a company to reduce scale and scope of its business to improve its financial performance Rightsizing Reorganization of a companys employees to improve efficiency

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Alternatives to Layoffs Early Retirement

Features of early retirement policies


Package of financial incentives that make it attractive for senior employees to retire earlier than they had planed Open window that restricts eligibility to a fairly short period of time

Avoiding problems with early retirements


A longtime employee who has performed satisfactorily over many years suddenly receives an unsatisfactory performance evaluation A manager indicates that senior employees who do not take early retirement may lose their jobs anyway because a layoff is likely in the near future Senior employees notice that their most recent pay raises are quite a bit lower than those of other, younger workers who are not eligible for early retirement

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Alternatives to Layoffs Employment Policies


Attrition
An

employment policy designed to reduce the companys workforce by not refilling job vacancies that are created by turnover.

Hiring
An

freeze

employment policy designed to reduce the companys workforce by not hiring any new employees into the company.

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Alternatives to Layoffs
Changes

in Job Design
and relocation

Reallocation Bumping Job

Sharing

Pay

and Benefit Policies

Pay

freezes Cut overtime Use vacation time and leave days Pay cuts
Retraining

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Implementing 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
Worker

employees

Adjustment and Retraining Notification Act of 1988 (WARN)

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Worker Adjustment and Retraining Notification Act of 1988 (WARN)


Worker

Adjustment and Retraining Notification Act (1988)


Employment

losses covered by the law:

Terminations Layoffs

other than discharges for cause, voluntary departures, or retirement exceeding six months of more than 50% in employees work hours during each month of any six-month period.

Reductions

Penalty
One

for failing to give notice

days pay and benefits to each employee for each days notice that should have been given, up to 60 days.

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Worker Adjustment and Retraining 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. law does not prevent the employer from closing down, nor does it require saving jobs.

The

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 Layoff
Implementing
Develop
Seniority

a Layoff

layoff criteria
vs. Performance

Communicating

to laid-off employees Coordinating media relations Maintaining security Reassuring survivors of the layoffs
Survivor
More

Anxiety

work Unsettling changes Self assessment of contributions Guilt

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Outplacement
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 Services
Emotional

Support Job-search Assistance