Budget cuts are a stressful time for human resources departments and all other parts of the organization. Since payroll is one of the biggest expenses for a company, it makes sense for HR teams to layoff staff when faced with these budget cuts.
To make sure this goes smoothly, it is a good idea to have a sample layoff letter made specifically for budget cuts when this situation arises at your organization. Laying off your staff is hard enough already, so having this sample available makes the overall process easier on your human resources team the next time your executives ask you to implement budget cuts for payroll expenses.
It also makes the process easier on your laid off staff by having a perfected layoff letter ready to go, instead of one made haphazardly.
In this blog, we will dig into the nitty gritty of budget cuts, how they impact layoffs, and how you should approach a layoff letter with budget cuts specifically in mind.
Now, let’s get to it..
Budget Cuts: What’s the deal?
Well, as our economy changes, organizations are having to maintain leaner staff and inventory to be able to adapt to quick changes within their own industry.
Because of this, a lot of organizations are continually working on budget cuts to make sure that they are as lean as possible in lieu of things that might be happening in the future.
There are also other extraneous reasons why an organization might have budget cuts. This could be from management looking to lean out financial statements before selling the organization, or because of a lawsuit that is causing the organization to hemorrhage money.
Budget cuts can come directly from an HR executive while trying to implement workforce planning for upcoming changes, or they might be directed from other high level executives. Like the CFO directing the HR executive to to conduct the budget cuts within their own realm of the organization.
Usually, most human resources professionals will analyze several different scenarios to find the optimal way to cut expenses. Since laying off staff is extremely detrimental to the lives of the people you are laying off, most HR executives will try to look at as many other options as possible.
Unfortunately, doing everything else besides layoffs might not be an option. Your team also has to weigh the pros and cons of severely damaging the morale and culture of a workplace by implementing strict budget cuts without layoffs (think pay deductions, reduced hours), and then losing great employees who they would of kept on in the case of a layoff, when they look for other opportunities.
How do budget cuts impact layoffs?
Once all of these situations have been analyzed, and you’re sure that conducting a layoff is the only thing that makes sense, you will then have to take actions to make sure that your layoff event is conducted smoothly.
- Selecting the employees who you want to layoff. There are several different approaches that you can take when trying to decide who to layoff. These include: Seniority Based Selection, Employee Status Based Selection, Merit Based Selection, Skills Based Selection, and Multiple Criteria Ranking. You can read more in-depth about each of these approaches here.
- Analyzing the employees you have selected to ensure you are compliant with all federal and state regulations.
- Notifying the government of any warn regulation impacts.
- Creating severance agreements.
- Notifying employees of their impending layoff, using a script and the letter template below.
What should you include in a layoff letter due to budget cuts?
Like any letter, the budget cuts layoff letter needs to start by addressing the employee by name and getting straight to the point.
While it may seem like an okay idea to beat around the bush and break the news lightly, it’s not. Nothing you can possibly write in this letter is going to make the employee happier to receive it. So, start the letter quickly by saying what is going on.
Something like this:
"Dear [Employee Name],
As you know, we have recently faced hard financial times in the current economy. We are taking this action to adapt to the market with new products & processes. Unfortunately, this action means that budget cuts within your department are necessary.
Due to this budget cuts initiative, we have come to the decision to eliminate positions within the organization. It is with deepest regret that I must notify you of your position being eliminated from the organization."
Explain that the company is instituting budget cuts due to whatever reason and that their job is impacted. If you want to give a little more detail, wait until the second paragraph.
This brings us to the next point:
The Middle of the Letter
Okay, so we’re midway down the page now. You can take this time to explain a little bit about why the layoff happened. Just like the layoff meeting - which you will still have to have, by the way. Layoff letters don’t get you out of having a conversation even if they overlap in content - you should explain that this is a move based on X reasons.
Don’t put blame on the employee. Don’t try to console them too much either. Explain, openly, why your company is instituting budget cuts that have resulted in layoffs.
For example, you could say this from the letter example above:
“Due to these new objectives that have caused us to institute budget cuts, we have come to the decision to eliminate positions within the organization. It is with deepest regret that I must notify you of your position being eliminated from the organization.”
This shows that you care while also telling them what is going on. It consoles but not too much. You’re not in there apologizing and trying to make the process feel better.
When learning how to write a layoff letter specifically for budget cuts, the most important thing to remember is that this letter has to be professional, a bit personal, but - most importantly - honest. That means you have to keep a bit of distance in your writing while also knowing when to bring it in.
The Middle: Part Two
The middle actually has two parts to it. (Surprise!) The first, as we just said, is all about alerting the staff member of what is happening and how they are impacted. That part needs to be short and to the point.
Next, you need to transition the letter to setting up the layoff meeting. This involves stating that a member of HR will reach out to the staff member with a phone call to set up a time to go over the layoff process.
Alert the staff member that benefits will be discussed during this meeting. You can let the staff member know that there will be outplacement services included in these benefits in the letter, though, because it lets them know right off the bat that they won’t be going through this transition alone, which can ease tension.
Here’s an example of how this section can look:
“Someone from Human Resources will call you to set up a meeting in the coming days to discuss this process and the overall implications. The HR representative will discuss with you your separation benefits. These benefits include the use of an outplacement service for assistance in finding a new position through resume writing and career counseling services. Please feel free to ask this HR representative any questions in relation to the position elimination.”
You can also add in how severance works, too, if you have a policy on paper. For example, if severance pay is based on how long the employee was with the company, you can reiterate that policy in this letter. Just make sure you don’t end up explaining everything because that’s what the meeting is for and you don’t want to send the staff member a book - just a notification and brief explanation.
The End of the Letter
This section of the letter is super short. Really, you just want to thank the employee for all they have done at the organization and then sign off.
Again, it’s important to stay on task here. Don’t go on and on after you have explained what needs explained. You can simply end with a one sentence send off and then start to call those who are impacted by the event.
Here’s an example:
“We appreciate all of the good work you have done during your employment.
That should conclude your letter and allow you to send it off. However, you also have to make sure you handle the event in a legal way, which means checking in with your legal team, especially when you are letting go of a group or have staff members that are over the age of 40 years old.