Overhiring amongst large corporations has ceased, and now, the tables are turning on the workforce that previously controlled the labor market. Mass layoffs have everyone nervous for their jobs, and while layoff announcements feel like part of the daily news cycle, that’s more for big companies—Google, Meta, Amazon, Nike, and more.  

As a smaller employer, mass layoffs look different in your organization: like, 20 people versus 2,000. However, layoffs still happen and are difficult to manage logistically and emotionally. If a considerable part of your workforce is cut, that counts as a layoff.

No one wants to consider their workforce in percentages, like “[Your organization] cut 15% of their workforce.” You may share an office and talk to these employees daily!  

However, to prevent layoffs, we need to cover what causes them. Then, you can use the five strategies outlined below to keep your employees.

What Causes Layoffs?  

Three major factors contribute to layoffs.

1. National and global economic forces. These are the factors that are totally beyond your control. Things like inflation, which peaked at 9.1% in June 2022 but remains high enough to force difficult decisions at many organizations. Or increasing interest rates, which make borrowing money more expensive and can push some major purchases out of reach. Additionally, the threat of a global recession seems to always lurk around the corner. Money is tight everywhere, and payroll is expensive.
2. Current or projected financial trouble. Companies may cut back on payroll now to give themselves a buffer against the financial challenges they anticipate. This is why layoffs can sometimes feel contagious. When large organizations start doing them, everyone gets scared, which can lead to more layoffs as businesses worry about tougher economic conditions to come. That’s why your workforce is nervous when Amazon lays off 18,000 employees—while it may not affect them immediately, they assume it will later.
3. Corrective action due to overhiring. While numbers like 12,000 employees laid off at UPS sound terrifying—and certainly are for those who lost their jobs—it’s important to understand this data in context. UPS laid off many employees because they overhired dramatically due to the rise in online shopping during stay-at-home orders. Other companies that overhired for similar reasons are cutting down on payroll expenses. Amazon, for example, went from 1.3 million employees in 2020 to 1.6 million in 2021 as global quarantines led millions to shift more of their purchases online. As the economy rebalances, some of that growth is bound to level off.

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