What Are Good Reasons to Lay Off an Employee?

Employers lay off employees for a variety of different reasons and laws in many states enable companies to lay off employees at any time as long as the stated reason of the layoff does not contravene state or federal law. Most layoffs are related to cost cutting or poor job performance but supervisors and human resources departments should always keep detailed records of the termination process to ensure no employee rights were violated.

Cost Cutting

During recessions, many companies cut back on production because of an imbalance between supply and demand. A company cannot remain financially viable if it pays people to manufacture goods that are unsold. Companies also cut back on production when new technologies render older technologies obsolete. In some instances, increased automation leads to a reduced workforce, while in other situations, companies lay off employees whose skill sets are not suited to new areas of development and production. Companies should cut nonessential roles that actually cause the company to lose money.

Violating Company Policy

Companies in various different industries require employees to abide by privacy policies whether to protect customer information or company secrets. A company should lay off an employee who breaches security and leaks proprietary information into the public domain. Employees who violate safety procedures pose a danger to themselves and other employees and potentially leave the company susceptible to lawsuits. Laying off employees who act recklessly helps the company to maintain a safe environment and potentially saves money. Other serious violations of company rules and regulations often necessitate an employee termination.

Moving Operations

Major employers sometimes move operations to a new state or nation because local tax laws limit profitability or because the local area lacks a sufficiently skilled workforce. Employers sometimes offer existing employees the chance to relocate but the relocation process often proves expensive for both the firm and the employees. If a company moves its operations to another nation, the existing employees might have problems with both learning the local language and obtaining work authorization to work abroad. Therefore, many companies benefit from laying off employees prior to moving operations.


Employers should take employee job performance into account when making layoffs. Employees who are frequently tardy or absent without a valid excuse are less productive than other more reliable employees. People who shirk job responsibilities or prove unwilling or unable to obtain industry licenses needed to perform their job duties are not able perform the task they were hired for. To remain competitive and productive, companies must hold employees accountable for their performances and, when necessary, lay off people who consistently fail to meet basic expectations.