There are many reasons that an employee leaves a company, but when it comes down to it, they fall into just two categories – voluntary or involuntary. Even though it should be easy to tell the difference, with only two categories to choose from, the way we speak about terminating employment has led to some confusion. In this article, we’ll look at being laid off vs fired. While some people use these terms interchangeably, there are actually some very significant differences.
Quick summary
If you’re in a rush, here’s a quick summary of the differences between layoff vs fired, which we discuss in much greater depth below.
LAID OFF
- Involuntary termination
- Caused by business decision
- May include a severance package
- Often includes outplacement
- Doesn’t impact future employment
- Eligible for jobseeker support
FIRED
- Technically a voluntary termination
- Caused by employee action
- No severance pay
- No outplacement services
- Can impact future employment
- Not eligible for jobseeker support
Layoff vs fired: what you need to know about voluntary and involuntary termination
Before we go any further, let’s define some terms.
A voluntary termination means that someone is leaving the company through their own choice. This could be because they’ve found a new job at another company, took up the option of a voluntary layoff, decided to retire or return to studies, or many other reasons. In short, it was the employee’s choice.
An involuntary termination, as it sounds, is the exact opposite. The employee has no choice, as the company has decided to terminate their contract. This could be due to a layoff event, for example.
In this article, we’re concerned with involuntary terminations.
Circumstances of terminations – layoffs
The company may decide to conduct a headcount reduction for several reasons – maybe a site is closing, the business is being restructured, or it needs to reduce overhead costs. Whatever the reason, the employee has not contributed to any of the factors involved but nonetheless will lose their job.
Expert tip:
If your company is planning layoffs (also known as retrenchments), we highly recommend offering outplacement services to affected employees. This not only smooths their path into a new role, it also protects your employer brand and reduces the potential for lawsuits from affected staff.
Circumstances of terminations – firings
Of course, not every termination is out of the employee’s control. To get fired, the employee is at fault – even if they don’t agree. Maybe they’ve consistently underperformed, breached their contract, or been accused of gross misconduct. Whatever the reason, their action has led to their dismissal.
The employee has taken the action leading to their termination, so it is technically a voluntary termination – even if their intention was to continue in the role.
Using the correct terminology
As we said above, it’s common these days for the terms “laid off” and “fired” to be used interchangeably. It is, however, incredibly important to use the correct words for each particular situation. That’s because being laid off and being fired are viewed very differently when the employee starts to apply for new jobs.
If the employee was laid off, through no fault of their own, it’s crucial to avoid using the term “fired”. This has connotations that suggest their performance or attitude wasn’t up to scratch, and is likely to be perceived very negatively by potential employers.
Conversely, if the employee was fired, they shouldn’t represent themselves as being “laid off,” as their true circumstances are likely to be uncovered during a reference or background check. They could instead simply position themselves as “terminated.”
Here are the key points, to clarify the discussion so far:
When an employee is laid off, this involuntary termination is beyond their control and due to business decisions external to their performance and behaviour. The layoff may include a severance agreement, with such benefits as severance pay and outplacement support. A layoff should not affect the employee’s ability to find a new role, as this doesn’t reflect badly on the employee. In fact, being laid off can be a very stressful event, so they may even be viewed sympathetically by employers.
When an employee is fired, the employee is at fault, and they are being terminated because of the choices they made. This can negatively impact their next career steps, as employers will be wary of taking on a new member of staff who has previously underperformed or behaved in a way that was detrimental to the business.
Words matter – using the right terms is important
Employees need to understand that using the wrong term – whether in their cover letter, application, or interview – can impact their chances of landing that coveted new role. Saying that you were “fired” rather than “laid off” can negatively influence a hiring manager’s perception of you. Similarly, saying you were “laid off” rather than “fired” brings more positive connotations. You can’t say you were laid off if you were fired, because that misrepresents your situation.
For HR teams, the terminology matters too. That’s because the procedures for firing an employee, compared to laying them off, are very different. The words used by an HR team can also affect how their former employees are perceived by their ex-colleagues and the wider job market.
When it comes down to it, making the choice to say that an employee was laid off vs fired matters. It can impact their job prospects and even your employer brand.
Layoff vs fired – understanding employee rights
As an HR professional, it’s important to understand whether an involuntarily terminated employee has been laid off or fired. It will affect their rights and benefits, as well as your internal processes and procedures. There are important differences in the rights and benefits relating to laid off vs fired staff, which you’ll need to navigate.
Rights and benefits when an employee is fired
When an employee is fired, the company doesn’t need to provide benefits. Severance and outplacement services are not usually offered. The termination is a clean break, and no further provision of support is necessary, although an inquiry needs to take place. If the employee is terminated for misconduct, the employer doesn’t need to provide either notice or salary-in-lieu.
Employees cannot access jobseeker support payments, as they are considered to have voluntarily made themselves unemployed.
Rights and benefits when an employee is laid off
In the case of layoffs, employees are often offered several benefits. The main benefit offered is usually a severance package, which includes financial support and access to outplacement services. This is designed to protect the company from wrongful termination lawsuits, whilst also maintaining the company’s brand and reputation.
The outplacement services provide support to outgoing employees at a stressful time, showing that the company cares about them by offering career coaching, CV writing, LinkedIn profile optimisation, and job search advice. While many outplacement firms provide this support for a set period of time, Careerminds offers this service until placement – i.e. until the employee is successfully placed in a meaningful new role.
Outplacement is a valuable tool for departing employees, as the more help the company can provide, the better the company will be perceived by affected staff, remaining staff, investors, and the general public.
When employees are laid off, they are entitled to jobseeker support. The SkillsFuture Jobseeker Support Scheme launched in 2024 to provide financial support to retrenched low- and middle-income citizens. This is a change of policy by a country that has previously rejected any form of unemployment benefit.
Whether your employee is terminated due to layoff or firing, we recommend working with your legal team to ensure your termination process is robust and compliant.
Alternatives to firing employees
While firings often seem to happen out of the blue, this is rarely the case. Usually, there is a build-up to the event, such as formal warnings. While sudden firings can happen, most take place over an extended period, and managers need to present a case for terminating the contract.
Sometimes, though, the company may not want to fire the employee. For example, maybe they fear negative media attention or don’t want to damage the employee’s prospects for future employment. In these cases, the company can choose to fire them by technically laying them off. For example, they could be offered a voluntary retrenchment package or their role could be made redundant.
In this situation, the employee would be able to take advantage of benefits, such as severance pay and outplacement services, and the company can protect its reputation and ensure the separation happens on good terms for both sides.
Furlough is another option for dismissing an employee in the short term. However, as an unpaid leave of absence for a specific period of time, it shouldn’t be used if the company doesn’t want the employee to return at some point in the future. This will obviously not be the case with most fired staff, but is an option to bear in mind.
Final thoughts on layoff vs fired
As we’ve shown, understanding the difference between being laid off and being fired is vital. As an HR professional, you need to be clear with your impacted employees which category their termination falls into. It will affect their benefits and future job prospects, as well as the company procedures that you need to follow.
The main difference between the two terminations is that one is within an employee’s control and the other isn’t. Whichever route you take to terminate an employee, it should be done in consultation with a legal partner.
Outplacement services can help your layoff event to proceed smoothly. Find out more about what Careerminds can offer to help your team manage this stressful project.
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