How Business Owners Can Handle Layoffs

Although the labor market continues to be tight, one analyst expects to see more cuts moving forward.

Workers paint the roof a picnic area in Clement Park, Littleton, Colo., April 17, 2024.
Workers paint the roof a picnic area in Clement Park, Littleton, Colo., April 17, 2024.
AP Photo/David Zalubowski, File

NEW YORK (AP) — With stubborn inflation and higher costs, layoffs at small businesses are sometimes a necessity.

U.S.-based employers announced 64,789 cuts in April, down 28% from 90,309 cuts announced in March, according to a report by global outplacement and business and executive coaching firm Challenger, Gray & Christmas, Inc.

But Andrew Challenger, senior vice president at the firm, said he expects more cuts going forward.

"The labor market remains tight. But as labor costs continue to rise, companies will be slower to hire, and we expect further cuts will be needed," he said. "This low April figure may be the calm before the storm."

Here's how to handle letting people go in a professional manner:

First, make sure you're complying with regulations related to layoffs. The federal WARN act, or the Worker Adjustment and Retraining Notification Act, requires a 60-day notice about a planned closing or mass layoffs. But that's only for employers with 100 or more employees.

Some states have their own WARN act with different rules. For example, New York State's WARN Act applies to private businesses with 50 or more full-time employees in New York State.

Next, craft a layoff plan. Choose a date for the layoffs and a date for notification. Send a notification to employees privately, and avoid doing more than one round of layoffs if possible.

Make sure you're clear on the reason for the layoffs and update staffers on severance, unemployment benefits and COBRA health insurance. You also could offer to write a letter of recommendation for the employee.

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