What a Small Business Owner Should Know Before Laying Off Employees

Though economists are telling us the recession has come to an end and things are beginning to rebound, the unfortunate result of an economic downturn that has lasted so long and affected so many industries, countries and skillsets is that the recovery is likely to take a very long time to show itself to small businesses.  This being the case, small businesses are still finding themselves having a need to cut costs and layoff employees.

While no business owner likes laying off an employee, those that have been ‘in the trenches’ awhile will typically reach the appropriate conclusion when necessary and begin developing a strategy to do what’s needed. 

However, it’s at this point when many small business owners may find themselves in a difficult situation.  If a layoff has not previously been required, then the small business owner will rarely have knowledge of the laws and issues involved in conducting a layoff with a minimum of risk – to the company and the employees.  The following information should be helpful in guiding you down the path of a worry-free layoff.

WARN Them

One of the most prominent employment statutes is the Workers Adjustment and Retraining Notification Act (WARN) of 1989. The WARN act gives workers and their families time to plan for a transition caused by employment loss. Slightly fewer than half the workers in the United States are covered by the statute, as it only applies if there are 100 or more employees in the company.

According to Heather Gatley, senior partner and vice-chair of the labor and employment practice at the Florida-based law firm of Steel, Hector & Davis, WARN requires employers to give employees and local governments 60 days of advance written notice of plant closings and mass layoffs in the following situations:

  • Plant closing – An employment loss during any 30-day period at the single site of employment for at least 50 full-time employees.
  • Mass layoff – An employment loss at the single site of employment during any 30-day period that must involve at least one of the following circumstances:
    • A reduction that affects at least 50 full-time employees who make up at least 33 percent of the company’s workforce.
    • A reduction that involves at least 500 full-time employees.

So, what does it mean to you? If your company fits any of these criteria you are required to provide the employees notice of a layoff. Therefore, in order to  A) keep the peace and  B) keep things as productive as possible until the layoff takes place, make sure you develop a comprehensive down-sizing program that takes care of the company – and the soon-to-be ex-employees as much as possible.  You should also insure that you have a plan to take care of the company’s remaining employees, who are just as likely to be shell-shocked as those who are out of work, but will also have the added burden of extra work to make up for those who are gone.

Documenting business justification and protected classes

Though employees would likely not consider it, from management’s point of view, deciding whom to lay off is hardly an easy decision. Senior executives must establish a documented, justifiable business reason for the layoff and analyze its effect on various protected classes of employees, typically defined by age, gender, race, and national origin. Unless the company can prove that its actions were genuine, and not a pretext for discrimination or sleight-of-hand (cutting a department only to resurrect it with a new name and new people), it could face lawsuits, according to Gatley. Federal protected class laws apply to companies with 15 or more employees, and while local laws vary, they typically cover companies with smaller numbers.

So how does a company insure they are fulfilling their legal obligations to employees, while still meeting the needs of the company?  The best way is to hire an outplacement consulting firm who specializes in these projects and can guide you thru them.  Another benefit offered by such firms is their ability to provide Job Search services at varying levels to those employees who have been down-sized.  This helps to make both the out-going and remaining staff feel that the company has been as responsible as possible, and provided every assistance they were able to insure the welfare of all involved

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Top 10 HR Mistakes Made by Businesses – Large & Small

  1. Failure to develop an effective corporate communication strategy; internal and external.
    • Establish specific communication policies
      • internal/external email
      • internet/intranet
      • social media
      • IM
      • media/public communication
      • corporate document sharing
    • Publicize internal communication; open access promotes honesty and trust between management and staff
      • staff meetings
      • town halls
      • newsletters
    • Handle confidential information appropriately
  2. Failure to link individual goals to company goals
    • Short-term and long-term objectives; personal and company
    • Developing action plans
      • corporate > division > department > individual
    • HR planning
      • staff selection & planning
      • training & development
  3. Not utilizing HR metrics to track activity and performance
    • Measure how activity is impacting the bottom line, not just the cost of the activity
    • Needs to objectively demonstrate benefits to the business
  4. Lack of employee motivation and retention strategies
    • What motivates employees?
      • recognition; feeling valued by the organization
      • sense of achievement
      • feeling they are an integral part of the organization
      • opportunity for increased responsibility and advancement
      • compensation package
    • Develop credible reward programs
    • Insure that compensation packages are competitive to the market
  5. Lack of strategic recruitment plan
    • Hire people that fit; effort, expectations, attitude, talent, skills, training, experience
    • HR needs to manage the recruitment process, not department heads or executives
  6. Lack of training
    • Empower front-line management with authority; train them to use it effectively for the organization’s benefit
    • Don’t allow lack of awareness to be an excuse for inappropriate actions
    • Insure managers have training regarding legal issues affecting the manager/employee relationship
    • Ensure there is a clear understanding of corporate values
  7. Not establishing employee performance guidelines
    • Establish a reward system based on performance
    • Insure timely attention to employee performance issues to prevent staff morale issues
  8. Failure to keep up-to-date on legal requirements related to HR
    • Establish a network of experts for guidance
    • Participate in continuing education programs
  9. Lack of documentation
    • Insure proper tracking, measuring, analysis, reporting and follow-up
    • Meet all legal requirements for payroll documentation
  10. Failure to maximize the effectiveness of the HR team
    • HR should be an integral part of the executive team
    • Be pro-active rather than re-active to avoid negative perception amongst staff
    • Allow the HR department to be the catalyst for change management initiatives

Let us help you avoid these mistakes; contact us via our website or email us at info@strategicgrowthconcepts.com for assistance with your HR strategies and structure.

10 Employee Handbook Mistakes Made by Small Businesses

All businesses with employees will benefit from having an employee handbook. Writing your company’s policies and procedures requires you to spend less time answering questions and explaining the rules and regulations of the office. Having a standardized employee manual will also lessen your chances of ending up in court.

To help you prepare an appropriate manual we’ll highlight some common mistakes that typically occur during the creation of employee handbooks, as follows:

Not having the handbook reviewed by a lawyer. There are many ways to state your policies, some of which may be vague or potentially misconstrued and leave you open to potential legal issues. Have an attorney who is well-versed in employment law review your handbook before designating it as complete and distributing to your staff.

Not taking into account federal and state laws. It is imperative that laws such as the Family Medical Leave Act, among others, are not mis-stated in your handbook. You also want to insure that your company policies are not violating personal rights. Both of these items are another reason to have an employment lawyer review your handbook prior to distribution.

Creating the long version. While you want to cover all of the essentials, you also don’t want to go into such great detail that you hand employees a novel that they’re unlikely to read. You want employees to be willing to become familiar with the contents. 

Not providing a means by which employees can complain about harassment or discrimination. The law requires that employers provide an opportunity for employees to voice such complaints as well as having a process in place by which their complaints will be addressed.

Failing to read such a handbook first. There’s no need to re-invent the wheel when you develop your company’s handbook, there are plenty of employee handbooks available to read as well as templates that can be found to help you construct yours. Review employee manuals from other companies and take advantage of available tools to help you in the development of your company’s employee handbook.

Failing to update your handbook. At least once per year, your company should update its employee manual – more often if there have been significant changes in company policies or laws related to employment.  Reasons to update your employee handbook typically include new laws, new technology, and various changes in how you conduct business.

Not having a disclaimer. A disclaimer prevents an employer from being boxed into a corner. Without a disclaimer, the handbook can be construed as a contract. There needs to be some room for the employer to use discretion and work within the general guidelines of the handbook. Therefore, do not make the mistake of neglecting the inclusion of a disclaimer for your company’s protection.

Not using straightforward language. If the handbook is too vague or technical and not clearly understood by employees, then it won’t serve its’ intended purpose. Instead of writing it in ‘legalese’, make sure everything is easy to understand and reader-friendly.

Not tactfully introducing the handbook to current employees. In order to prevent concerns among the staff that their jobs may be in danger, make it clear to employees that the handbook is just a means of clarifying procedures and policies so that everyone is on the same page. Be prepared to answer questions regarding the handbook.

Failing to make sure all employees have a handbook. You should have everyone sign off that they have received the handbook and keep the sign-off sheet in their employee files.

Resources for Developing Your Company’s Employee Handbook:

For more information helpful in preparing an employee handbook, see the Employment Regulations section and the Employment & HR Center of Allbusiness.com. For an employee handbook checklist, see the Employment Policies and Termination section of the AllBusiness.com Forms & Agreements Center.

Carefully Consider Your Hiring Practices

In my experience working with small businesses, particularly those without a trained HR professional on staff, I have seen many instances of illegal hiring practices.  In most cases, the problems are not necessarily intentional, but rather due to a lack of employer knowledge of the right way (legal) and wrong way (illegal) to conduct a candidate search and an interview. 

While this issue may seem to be minor within the scope of all the things a small business owner has to worry about, I assure you, the consequences can be substantial.  Consider the case of a Sonic franchisee who refused to hire a person with a speech impediment; that franchisee is currently facing Federal charges which can result in major financial penalties – read about the case HERE.

The following are links to some articles that will provide you with information to help you effectively prepare to conduct an effective, legal interview that will result in hiring the best candidate for your company:

Questions Not to Ask

Laws to Know Before Hiring

Tips on Hiring an Effective Manager

In these economic times where any employer who is actually hiring essentially has their pick from hundreds – or even thousands of candidates, that doesn’t mean that candidates should be treated any less respectfully than before.  Nor does it mean that companies can afford to be lax in the implementation of their hiring policies and procedures.  Make certain your company is protected, learn the legal guidelines and insure that those involved in hiring at your company follow them to the letter.