Parting Ways

“My business is slower to return than expected and I have too many employees. How do I reduce my headcount?”

Your HR Survival Tip

Your employee costs are often one of your highest line items, depending on the type of business you have. It’s important to know exactly how much you spend per employee overall so you can make good decisions about when you should increase or reduce the number of employees.

There are several types of terminations but they each have a specific use. Many companies like to use “layoff” because it feels softer to them. However, your choice could potentially result in legal obligations for you so you really do want to choose the type of termination that fits your scenario.

• Layoff – When you use layoff as your reason, the expectation is you will rehire the employee once business picks back up or you again have need of the position. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee is eligible for unemployment.


• Furlough – We rarely saw this used prior to the pandemic. It is almost exactly the same as a layoff except they remain an employee on your records. You still provide a final paycheck that includes any earned, unused vacation or PTO time, and the employee is eligible for unemployment. However, they are still technically an employee. There have been local laws in parts of California requiring companies to hire back furloughed employees before hiring others. In addition, the Families First Coronavirus Response Act (FFCRA) payment to employees with COVID issues is available to furloughed employees even if they aren’t actively working for you. If you truly can’t bring back a furloughed employee, you’ll still need to actually terminate them at some point.


• Resignation – When the separation with the company is initiated by the employee, it is a resignation. It doesn’t matter whether the employee provided notice or just walked off the job. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee will not be eligible for unemployment unless there were extenuating circumstances.


• Job Abandonment – When an employee is a no call, no show for a certain period of time, their termination is processed as a resignation. The length of time will vary from company to company based on the type of industry but the standard is 3 days. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee will not be eligible for unemployment unless there were extenuating circumstances.


• Position Elimination – This type is something we find companies wanting to use when they shouldn’t. If you are truly eliminating that person’s role, you need to have a strong justification…particularly if you have more than one employee in that role. If you have 5 technicians but only need 4, you are eliminating one position but then you need to justify why that person is the one losing their job. Beware of the appearance of discrimination when choosing. When you use position elimination as a reason, you want to be sure you won’t need that role again for at least 6 months. That’s not a legal timeline but it’s a safe one. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee is eligible for unemployment.


• Discharge – When the company initiates the separation, it’s a discharge (aka firing). This is usually due to poor performance, a bad hire for the job, or other reasons. But you do have a reason you can articulate for choosing to separate. You provide a final paycheck that includes any earned, unused vacation or PTO time. The employee is eligible for unemployment.

We occasionally hear about employees disliking the termination choice and want to use another one. For example, instead of discharge, they want to be laid off, etc. The easiest justification for keeping your choice is that no one except the unemployment department (EDD) will know what the reason was unless the employee tells someone. Companies no longer share reasons with other companies or even within their own company. When you have to share that an employee is gone, it’s best to just say “Sam is no longer working with us and we will be moving his duties/clients to George.” If an outside company contacts you to ask about the employee, the only safe response is to provide their title and dates of employment. Nothing more. At all.