Layoff shock: How employers can soften the blow
Management experts suggest firms retrain workers and offer competitive financial packages
After recent announcements that scores of employees would be laid off from Target Canada and Tim Hortons across the country, controversy boiled over how management made their decisions.
Target Canada’s CEO severance package matched that of all 17,600 laid-off employees, and at Tim Hortons, a laid-off manager has said the abrupt layoffs there were "really shocking."
While such announcements can provoke anger among employees, management experts say companies can take a humane approach in the face of downsizing that hits employees hard.
- Tim Hortons layoffs blindsided workers, manager says
- Tim Hortons layoffs: Long-time employees escorted out the door
- Target's package for ex-CEO matches package for all 17,600 Canadian workers
“The No. 1 thing is to treat people with respect in the process. These are human beings that you’re talking about,” says Fraser Johnson, a professor at the Ivey Business School at Western University in London, Ont.
According to internal memos provided to CBC News, Tim Hortons management said it tried to do that.
"Our top priority throughout this process has been one thing — respect," read a memo to employees.
A corporate manager, who witnessed people filing out the door of the Oakville, Ont., head office, said that was hardly the case. Just days before the axe dropped, she said, the company played down media speculation about the layoffs and gave employees the impression they shouldn’t worry.
Tim Hortons confirmed on Thursday that, in total, 350 jobs were cut at corporate offices across the country.
It’s very shocking to know that you have no information up to a certain date and then suddenly your job is gone.- Anil Verma
While the employees may have felt blindsided, a professor at the Rotman School of Management at the University of Toronto says that’s common practice.
“Of course it comes as a very abrupt and rude shock. It’s very shocking to know that you have no information up to a certain date and then suddenly your job is gone,” says Anil Verma.
“It’s kind of messy and what the employers want is that there’s a cleanbreak … a big bang moment at which everything happens and you are no longer part of the organization.”
The Ivey School’s Johnson says that abruptness is part of established management practice, which is to go through layoffs effectively and in as short a time as possible.
“What you don’t want to do is have it drag on for a protracted period of time. Then you get people looking over their shoulders saying, ‘Am I going to be next?’ ” says Johnson, who’s also supply chain management chair at the Ivey Business School.
Some critics had sounded warning bells as Tim Hortons and Burger King worked towards their $12.5-billion merger. The deal is backed by Burger King owner 3G Capital, a Brazilian investment firm known for its ruthless cost-cutting.
One is to provide retraining, especially for older workers.
An example is a 45-year-old worker steel worker who spent, let’s say, 20 years with a company. It’s very hard, says Verma, for the worker to have the up-to-date skill sets that today’s broader job market requires.
However, he says there is a “very small number of cases” where companies would actually provide or pay for retraining for their employees.
“It’s typically the responsibility of the individual,” he said, but noted that there are federally funded retraining programs for displaced employees.
The employer could also pay for outplacement agencies to step in and assist workers with retraining, as well as provide career and financial counselling services, added the Ivey School’s Johnson.
“You can walk someone out to the door and give them a cheque, but if they don’t have the tools and the skills and the capabilities to look for a job, then I think you’re creating a problem for individuals involved,” he said.
Johnson says another way for employers to treat the individuals with respect is by giving them a competitive financial package “so that they don’t have to spend a lot of time with lawyers to try to negotiate a better deal with companies.”
In reality though, laid-off employees may not always get a fair shake, according to an employment law expert.
Lawyer Daniel Lublin says that a lot of packages are usually at the bottom of the reasonable range or even slightly below.
“In other words, it’s not a total rip-off but it’s not a really fair deal either,” says Lublin, a partner at employment law firm Whitten & Lublin in Toronto.
“If you get a severance package, you have to understand that what you’re being offered is what the employer thinks you’ll agree to, not necessarily what you’re entitled to,” he says, adding that most people can’t be harmed by negotiating for more.
Lublin says severance packages should be in writing, especially in situations of downsizing and mass layoffs, and that workers should be given “some time” to consider the package. If an employer asks you to sign on the spot, don’t. That’s duress, Lublin says.
The right to sue
Verma says it’s been established that severance pay reflects how long a person has been working at the company and how difficult it is to find the next job. The Canadian norm for longtime employees, he says, is about two to three weeks of pay for each year of employment.
And if you, the employee, don’t like what happens during a negotiation, says Lublin, you have the right to sue.
Lublin also commonly informs his clients that provincial and federal legislation gives people a minimum amount of severance that they’re entitled to unconditionally.
“There’s a government-prescribed payment that you’re entitled to and that should cover you for the immediate future after your termination,” he says.
“You’re being paid right now to look for another job so it could be worse,” Lublin says. “In other countries, you don’t get paid severance — at least not this much.”