DiSabatino CPA Business Blog

Mike DiSabatino CPA

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Layoffs imminent? Include these 4 steps in your plan


Are you at the point you need to make difficult staffing decisions? Here are four items not to forget.

Whether your firm is large, small or somewhere in between, you may be faced with rising costs and declining revenues. This, in turn, may force you to make tough personnel decisions, including layoffs.

Before you take this step, however, it makes sense to consider alternatives. Ask yourself whether expense reductions can be accomplished using less drastic means. For instance, a freeze on hiring, promotions or pay raises may reduce costs to an acceptable level. Asking employees to pare down their work hours is another option.

If these options do not reduce costs to an acceptable level, a layoff scenario may be unavoidable. Nevertheless, it pays to proceed with caution. Here are a few things to confirm before you start staff reductions:

  • You know what the company will need going forward. Focus on positions and departments, not individual workers. Hacking away indiscriminately is a sure way to damage your company's prospects further.
  • You have a legitimate business reason for laying off employees. This might include declining sales, loss of a key contract, or burgeoning supply costs. Ensure that discrimination plays no part in staff reduction.
  • You have written personnel policies that describe when and how your company will conduct layoffs. If you haven't established such rules, don't wait for a business downturn to document them. Check any employment contracts to make sure provisions aren't violated, including an employee's right to severance pay.

You have a communication plan for your staff. Regularly communicate with your staff, preferably well in advance of any layoff action. Keeping employees informed about business realities can mitigate hard feelings and allow them to adjust, if necessary, to employment apart from your company.

 As always, feel free to pass this Tip along to friends, and reach out if you need help with your personal tax and finance situation. 

DiSabatino CPA
Michael DiSabatino
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Camarillo, CA 93012
Phone: 805-389-7300
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