Reduction in force (RIF) occurs when a company permanently eliminates positions. It’s different from a furlough, in which an employee’s hours are temporarily reduced. It’s also not a layoff, in which a company may let employees go due to budgetary reasons or a lack of available work but hopes to refill those positions in the future. A layoff could become a RIF if the company never rehires or restaffs, but to be considered a RIF, the end result must be a permanently lower headcount.
There are several reasons why a RIF might occur. RIFs can happen when a business changes direction, restructures, permanently closes an office or branch, moves to a new location, undergoes a merger, is acquired by another company or faces financial hardship.
Whatever the reason for a RIF, it’s a big decision that typically affects numerous employees, their managers and the company as a whole. RIFs can cause ripple effects that impact remaining employees and the organization’s reputation among competitors, customers, consumers and potential job applicants. It’s important for business leaders and HR personnel to carefully consider if a RIF is the right solution, how it will be implemented, how the company will help exiting employees and how it can help its remaining staff feel confident in their careers.
reduction in force adverse impact analysis
RIFs can negatively affect a company’s reputation. Consumers and competitors may see the decision as callous or as an indication that a company is failing. These perceptions have their own consequences, but according to the Society of Human Research Management, a worst-case scenario can involve costly litigation. For example, if a company conducts a RIF that disproportionally affects women, older employees or employees of color, these employees may file a discrimination claim.
To avoid litigation, companies will do their due diligence and conduct an adverse impact analysis before making any final decisions. First, they’ll list each employee affected by the RIF, then run an analysis to see if there are any disparities. If it’s revealed that a RIF would affect far more employees over 40 than younger employees, for instance, this could trigger an age discrimination lawsuit.
Avoiding litigation isn’t as simple as just swapping younger and older employees or trading women for men. Decision makers can instead benefit from examining why these disparities occurred and documenting any key findings and takeaways.
In one instance, the Equal Employment Opportunity Commission filed an age discrimination complaint against Ohio State University on behalf of a 53-year-old HR generalist who was part of a RIF in 2018, along with two other employees over 60. Several months later, the school promoted a woman in her 20s to his position. An adverse impact analysis might have revealed if the RIF was necessary or if there was any bias against older employees within the department.
As another example, let’s say that a media company restructures. It decides to continue running written content and bolster its podcast arm but will no longer produce videos. The company could conduct a RIF that eliminates its entire video department. It would be a defensible RIF even if every video employee was female. However, it would be less so if the company only eliminated the video positions that had been filled by women.
Through an adverse impact analysis, RIFs may be drastically changed, reduced or not happen at all.
the role of outplacement in RIF unemployment benefits
No matter how sound a company’s reason for a RIF, former employees will grieve their lost jobs and worry about what comes next. They may feel as though they did something wrong, even though RIFs are not a direct reflection on an individual’s job performance. These employees may feel betrayed or angry. They may also seek litigation or talk poorly about their experience to friends or online.
To build goodwill, ease emotional distress and show exiting employees that their work was valued, companies may offer complimentary outplacement support. Outplacement services are an essential RIF unemployment benefit to help transitioning employees find new jobs. Through outplacement services, job seekers can receive support, including a freshly written, targeted and optimized resume and social profile, personalized career coaching and access to highly targeted job leads.
Outplacement is considered part of the RIF severance package, which may also include salary and health benefits continuation, vacation payout and other means to ease the transition. Looking for a new job that represents a lateral move or even a step up after facing a RIF can be overwhelming. Learning new skills to make a transition to a different career function or industry can be even more challenging.
Outplacement can offer hope and excitement as a transitioning employee begins to consider new avenues and beginnings — and also builds trust and appreciation for the former employer, even during departure. This goodwill will help the company maintain its brand reputation and safeguard against negative social media ratings on sites such as Glassdoor.
Another option to consider before, during, after or in addition to a RIF is career development. Career development services allow current employees to take charge of their careers, explore and expand their career possibilities and learn new skills or update existing ones. Employees will be better prepared to seek new opportunities internally or to be redeployed internally to where they can be most effective. Promoting internal mobility reduces hiring and rehiring costs for the company, preserves institutional knowledge, reduces time spent onboarding and builds loyalty among employees.
outplacement beyond RIF
Outplacement offers many lasting benefits for both impacted employees and the company long after a RIF.
A 2019 RiseSmart survey of 1,500 HR professionals from U.S. and abroad found that:
- of companies that had a formal severance policy, half offered outplacement services
- of those, 63% offered it to all non-exempt employees, based on factors such as job level, length of employment and performance
- 60 percent of all companies surveyed had redeployment programs to match employees with open internal positions
- the number of organizations using redeployment as a talent mobility and retention strategy is up 14 percentage points from 2017
In some countries, it’s even more common. In France, companies with more than 1,000 employees are required to offer outplacement. According to Arnaud Courtier, France Directeur Général, RiseSmart, the most common practice is to ‘use an outside outplacement consultant instead of attempting to deliver these critical services through internal programs led by people who do not have the specific expertise to deliver successful outcomes.’
Outplacement can also help a company save money in the long run, well after a reduction in force. Employees who benefit from outplacement services can secure new jobs more quickly, meaning companies that offer these services will ultimately save on unemployment costs and lower unemployment insurance taxes.
Parting on good terms with exiting employees also helps a company retain its reputation as a good place to work. A poll from digital growth agency Fractl found that over half of respondents rated former employers poorly on sites like Glassdoor, while a third had turned down a job offer after reading a bad review.
Exiting employees who feel supported and find fulfilling employment quickly are less inclined to leave bad reviews or talk poorly about their former employers on social media, where the company will be judged in the court of public opinion. They may even continue to be a customer or brand ambassador within their network and, if an opportunity for rehire emerges in the future, they’re more likely to say ‘yes.’ A returning employee needs less training and guidance than a new candidate, which can drive additional cost savings.
Outplacement also positively affects employees who were not affected by the RIF. Following any kind of RIF or layoff, companies often see a decrease in productivity or higher turnover. This occurs for several reasons. Remaining employees who have to cover duties once performed by someone else may feel stressed or overburdened. They might miss colleagues they no longer see or feel guilty about surviving a RIF. They could become unsure about their own future with the company, which can lower productivity and lead them to seek employment elsewhere.
Losing high-performing employees — who may take years of experience or even clients with them — means incurring high costs to replace them, an endeavor only made more challenging by negative online reviews. A Glassdoor survey conducted online by The Harris Poll in 2018 asked respondents why they might pull out of a recruitment process. The top reason, at 44%, was finding out about a recent layoff, while 35% cited reading negative reviews from employees.
Offering outplacement during a reduction in force can show remaining employees that they will be cared for in the future should anything happen. These employees are more likely to stay, while top candidates will be easier to recruit if they perceive a job change as less of a risk.
Outplacement is just one solution to make everyone feel supported, even when a company is forced to make the hard decisions no manager wants to deliver. It may seem like a simple service, but its benefits are far-reaching and long-lasting during and after RIF.
For more on outplacement, read our blog, What is Outplacement?
Randstad RiseSmart team