What Are the Advantages & Disadvantages of Layoffs on the Basis of Seniority?
"Last-hired, first-fired" is a common layoff strategy for business. This method removes personality or bias from the equation. Companies may feel this strategy protects them from discrimination lawsuits. Some union contracts specify that workers must be laid off by seniority instead of merit. However, discharging workers on the basis of seniority has disadvantages for a company as well. In some cases, a combination of merit-based and seniority works best for layoffs.
Laying off workers based on seniority rewards the workers who have been with the company the longest. The feeling is that these workers have been loyal, so the company is loyal to them. This probably had greater impact in previous decades, when employees often worked for the same company for many years. These employees felt a true sense of loyalty to employers. Tough economic times have demonstrated that even working decades with the same company doesn't guarantee your position won't be eliminated. The most senior employees might hang on a little longer, but the days of working for one company until retirement are past.
Workers who have been with you the longest have the most experience. They know your company better than newer workers and have the training and skill you need. While this is often true, younger workers may bring new skills to the job. Your newest employees may have more familiarity with new technology and bring new ideas and innovations that your company may need to remain competitive.
Laying off your newest employees may mean cutting those who make the lowest salaries. Senior employees usually earn the most money. If you're laying off people because of budget woes, cutting lower-salaried employees might not be enough to get you out of trouble. Trimming from the top could result in saving more jobs overall and a better bottom line for your company.
Senior employees may not be your best employees. In every company, some employees stick around simply because they're not terrible enough to be fired, but they're not the best employees, either. Employees with less time on the job may do more or better work. Letting the higher-performing employees go deprives you of their skills and could hurt your business in the long run.