The U.S. economy is experiencing a continuous rise in inflation and interest rates. As a result, many businesses are facing uncertainty. The current economic climate has forced companies to make the challenging decision to adjust their number of employees. By reducing the employee headcount, many employers hope to reduce total costs and increase efficiencies.
As an employer, you want to take a proactive approach. Even if you’re not planning on implementing employee layoffs, it is vital to begin developing a strategy. A well-planned strategy mitigates litigation risk while remaining compliant with local, state, and federal laws. While building your strategy, the following are a few things to keep in mind.
Reduce Discrimination Claims
In the decision to make a reduction in workforce (RIF), employers should consider conducting a statistical analysis. By making this analysis, employers can ensure that the RIF selection criteria does not discriminate against protected classes such as age, race, and gender. While there are multiple reasons for a claim, starting with a statistical analysis can mitigate these claims.
If an employer chooses, they may focus their RIF selection qualifications on objective factors, such as length of employment. Following this style of selection is more likely to protect you from discrimination claims.
Federal, State, and Local Requirements
Depending on the industry, employers must consider additional obligations under the federal Worker Adjustment and Retraining Notification (WARN) Act. This act requires employers to give employees at least a 60-days-notice of a mass layoff or a plant shutdown.
A multi-state employer must implement a “mini-WARN” act. When it comes to managing the mini-WARNs, they vary widely in scope. Each state differentiates from the time frame of notice to when employees are expected to receive final payments. There are currently 16 states operating under this act.
Severance and Voluntary Separation
Implementing a RIF can be challenging for a business owner, however, there is an alternative. Employers can offer severance packages due to a voluntary separation. The purpose of voluntary separation is to allow business owners to minimize the impact of RIF by allowing employees to leave voluntarily.
Regardless of whether the separation is voluntary or not, employers should consider offering severance agreements. Employees who resign within the active RIF period will be offered severance pay. The amount of employee severance is based upon the length of service and salary at the separation.
Who Receives Severance
The voluntary RIF separation program is only applicable after an announcement declaring a downsize has been made throughout the organization. However, this can only be implemented if the employee did not place their resignation notice before the RIF. Those who volunteer to leave the company will receive the same benefits and entitlements as the employees subject to involuntary RIF separations. If there is an overwhelming amount of voluntary RIF applicants, they will be processed in order of seniority.
GMS’ Support
When it comes to managing a RIF, employers need quality HR management. As a business owner in times of uncertainty, you need a strong partner to lean on. Our HR experts will provide you with the proper options allowing you to make the best choice for your business while remaining compliant. While times remain uncertain, GMS’ support does not. Contact us today to learn more.