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Layoff Vs Fired: Know the Differences

30 August
by Josh Hrala
5 minute read

There are many ways that an employee can make an exit from an organization, but there are really two categories for all terminations: voluntary and involuntary. Despite there only being two choices to pick from, popular culture and the way we talk about termination has muddied the waters, leading to some confusion about the differences between a layoff and a firing.

To help get to the core of this issue, let’s explore what it means to be laid off and what it means to be fired to set the record straight.

Layoff Vs Fired: Understanding Voluntary and Involuntary Termination

The first step is to understand the key difference between a layoff and firing situation. The best way to think about this is to consider how much control the person being let go has over the situation.

For example, if the person is laid off because the business is closing a plant, factory, or is restructuring in some way, the employee has zero control. The move to downsize was a business decision that has impacted their job without any input or action from them.

This means that the person was involuntarily terminated, allowing them - in many states anyway - to seek unemployment compensation while they hunt for a new role elsewhere. (Pro tip: if you are holding layoffs, we highly suggest you implement outplacement services to help your outbound employees land on their feet).

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On the other hand, being fired is technically - even if the employee doesn’t think so - within their control. Normally, to get fired, an employee has to break a company rule, perform poorly, or do some other action that leads to their termination.

That last part is key.

Firings happen because of employee action, meaning that the termination and loss of employment is technically voluntary. This also means that the person is typically unable to collect unemployment. The same is true if a person leaves a company by simply quitting without having a new role lined up.

In short, even though it seems like being fired is involuntary - let’s face it, who actually tries to get fired? - the reality is that the employee had control over the situation that led to that decision.

“The assumption is that quitting or being fired are reasons you do control. So, if you quit or were fired, you typically do not qualify to receive unemployment compensation,” reports Susan P. Joyce from Job-Hunt.Org.

Layoff vs Fired: Use the Correct Term!

Like we said above, pop culture and conversational speech has led to a corroding of what these terms actually mean.

For example, a layoff is typically a temporary reduction event with employees remaining on a recall list, allowing them to work for the company again if possible. Obviously, many layoffs become permanent reductions in force (or RIFs), but it is not the same as being fired even if it results in permanent job loss.

layoff vs fired

This is because these two things - layoffs and firings - are looked at completely differently when the person looks to get hired elsewhere.

“Especially if you have been laid off, do NOT consider yourself ‘fired.’ Your employment was not terminated because of your poor performance. It ended because of bad luck -- you were in the classic ‘wrong place at the wrong time’ situation,” Joyce continues.

“If you were fired, do not represent yourself as ‘laid off’ because an employer checking references will discover the truth pretty quickly. But, do put your job loss in the most positive terms, and don't describe yourself as ‘terminated.’”

In the end, whether you were fired or laid off matters. Knowing the difference can help navigate future job roles, and lying to a future employer - who will most likely call your references - is never a good idea.

Layoff Vs Fired: The Benefits

Some states are ‘at-will,’ meaning that employees can be terminated whenever the employer deems fit. However, most of the time layoffs come with benefits that firings do not.

For example, a typical layoff is announced, a meeting is held, a severance package is offered, and outplacement services provided. It should be clear that the employer doesn’t want to let the employee go and upset their lives. They are doing it because of a business need that has nothing to do with the employee personally.

Because of this, employers offer a bunch of benefits to not only protect themselves from lawsuits but to also protect their corporate brand and make sure that their employee - who is now in an extremely stressful situation - can get through as easily as possible.

If you look at this compared to a firing, the contrast is stark.

layoff vs fired

When a person is fired, the move typically happens suddenly without all of the benefits attached to it. Now, usually, employers have rules on the books about how many strikes a person can have before they are fired, but it can be different for every employer.

A person who is fired doesn’t usually get a severance agreement or outplacement services offered to them, either. This is largely because there is a substantial reason for them to get fired, making a severance agreement - on the employer’s end - not as important because the threat of a lawsuit isn’t as prevalent.

Layoff Vs Fired: Key Takeaways

In the end, knowing the difference between a layoff event and a firing is crucial. For HR, you should be clear with your employee as to which category their termination falls into.

Many organizations also offer voluntary layoffs as a way to fire people, though this depends on the situation, the person being let go, and many other things. Organizations do this so that the person being let go doesn't have a difficult time finding a new role in a different organization since the termination isn't technically a firing.

Plus, a voluntary layoff can come with some of the benefits that are typically offered by other layoff events.

For employees who were let go, it's important to note that a firing is a voluntary termination because a rule was broken or an action was taken to directly cause the loss of work. A layoff, on the other hand, is completely out of an employee's control, allowing them to collect unemployment (most of the time) and seek benefits from the company.

Remember to always consult your legal counsel and your policies before terminating employees to ensure that you are complying with all local, state, and federal laws.

Want to learn more about layoffs? Get started with our comprehensive guide:

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