Layoffs have been in the news this year. The Trump administration’s stated objective to reduce the federal workforce has affected hundreds of thousands of employees and contractors. Many other employers have also conducted layoffs.
This may come as no surprise — especially in certain industries. A January 2025 report by Resume Templates, a tech firm specializing in resumé building, found that of 1,000 U.S. managers surveyed, 45% reported being likely to lay off employees this year. And workers themselves are feeling the pressure. Of 1,000 adults surveyed by lending firm Clarify Capital, one in three described themselves as having “layoff anxiety” in 2025.
If your organization is considering layoffs this year, or at any point in the future, it’s important to handle the process carefully. Here are some critical points to keep in mind.
Run the numbers
The allure of layoffs stems from the fact that payroll is typically an employer’s biggest expense. Reducing headcount offers immediate savings in compensation and benefits.
However, layoffs may bring unexpected costs as well. For example, many employers now offer severance packages in exchange for a release of claims against the organization. The cost of severance can quickly eat into the projected savings gained from layoffs, at least in the short term.
Also, your unemployment insurance rates may rise — particularly if many former employees file claims simultaneously. And indirect costs often accompany layoffs as well. You’ll need to spend time and resources “offboarding” employees. This may include:
- Conducting exit interviews to gather important knowledge,
- Collecting organizational property,
- Issuing final paychecks, which may include accrued time-off payouts and other items, and
- Ensuring legal compliance.
You’ll also have to redistribute workloads, which often involves training. And should business pick up down the line, you’ll face hiring or rehiring costs.
Last, there’s the inevitable morale hit. Employees remaining after layoffs may struggle with engagement and productivity. Some may quit out of fear of future workforce reductions.
The bottom line is that, from a financial perspective, it’s critical to be absolutely sure layoffs are necessary. Run the numbers and then run them again. You may wish to first pursue alternatives such as reduced hours, temporary furloughs or hiring freezes.
Beware of legal pitfalls
Layoffs also bring serious legal risks. You could face a lawsuit if the process leading up to a staff reduction appears biased, or if layoffs seem to disproportionately affect one or more protected groups. Work closely with a qualified attorney to design your layoff strategy and document everything.
In some cases, you may be subject to federal notification requirements. Under the Older Workers Benefit Protection Act, employees who are 40 or older must have at least 45 days to review and sign severance agreements, plus an additional seven days to revoke their signatures. Also, employers need to provide workers in this age group with the ages and job titles of all employees in the relevant organizational unit or units affected by the layoffs, as well as those who aren’t.
In addition, watch out for the Worker Adjustment and Retraining Notification (WARN) Act. It applies to employers with 100 or more employees. Those planning a qualified plant closing or mass layoff (as defined under the act) may be required to provide 60 days’ notice. Several states have “mini-WARN” laws with their own thresholds and rules.
Finally, don’t forget about your obligations under the Consolidated Omnibus Budget Reconciliation Act (COBRA). Generally, if eligible employees lose their jobs because of layoffs, they’re entitled to continuing group health insurance coverage under the COBRA rules. Any misstep here could trigger penalties and lawsuits.
Work with your advisors
As mentioned, a qualified attorney’s input is highly advisable when exploring the idea of layoffs. Please consider us as well. We can help you assess whether a workforce reduction truly makes financial sense given your organization’s broader strategic goals. And if you decide to move forward, we can assist you in structuring budget-smart, tax-efficient severance packages.
© 2025 TopLine Content Marketing Team
