what is reduction in force (RIF) and what does it mean for you?

October 19, 2022

A reduction in force is a permanent elimination of positions.

Reduction in force (RIF) occurs when a company permanently eliminates positions. It’s different from a furlough, in which an employee’s hours are temporarily reduced. It’s also not a layoff, in which a company may let employees go due to budgetary reasons or a lack of available work but hopes to refill those positions in the future. A layoff could become a RIF if the company never rehires or restaffs, but to be considered a RIF, the end result must be a permanently lower headcount.

There are several reasons why a RIF might occur. RIFs can happen when a business changes direction, restructures, permanently closes an office or branch, moves to a new location, undergoes a merger, is acquired by another company or faces financial hardship.

Whatever the reason for a RIF, it’s a big decision that typically affects numerous employees, their managers and the company as a whole. RIFs can cause ripple effects that impact remaining employees and the organization’s reputation among competitors, customers, consumers and potential job applicants. It’s important for business leaders and HR personnel to carefully consider if a RIF is the right solution, how it will be implemented, how the company will help exiting employees and how it can help its remaining staff feel confident in their careers.

reduction in force adverse impact analysis

RIFs can negatively affect a company’s reputation. Consumers and competitors may see the decision as callous or as an indication that a company is failing. These perceptions have their own consequences, but according to the Society of Human Research Management, a worst-case scenario can involve costly litigation. For example, if a company conducts a RIF that disproportionally affects women, older employees or employees of color, these employees may file a discrimination claim.

To avoid litigation, companies will do their due diligence and conduct an adverse impact analysis before making any final decisions. First, they’ll list each employee affected by the RIF, then run an analysis to see if there are any disparities. If it’s revealed that a RIF would affect far more employees over 40 than younger employees, for instance, this could trigger an age discrimination lawsuit.

Avoiding litigation isn’t as simple as just swapping younger and older employees or trading women for men. Decision makers can instead benefit from examining why these disparities occurred and documenting any key findings and takeaways.

In one instance, the Equal Employment Opportunity Commission filed an age discrimination complaint against Ohio State University on behalf of a 53-year-old HR generalist who was part of a RIF in 2018, along with two other employees over 60. Several months later, the school promoted a woman in her 20s to his position. An adverse impact analysis might have revealed if the RIF was necessary or if there was any bias against older employees within the department.

As another example, let’s say that a media company restructures. It decides to continue running written content and bolster its podcast arm but will no longer produce videos. The company could conduct a RIF that eliminates its entire video department. It would be a defensible RIF even if every video employee was female. However, it would be less so if the company only eliminated the video positions that had been filled by women.

Through an adverse impact analysis, RIFs may be drastically changed, reduced or not happen at all.

the role of outplacement in RIF unemployment benefits

No matter how sound a company’s reason for a RIF, former employees will grieve their lost jobs and worry about what comes next. They may feel as though they did something wrong, even though RIFs are not a direct reflection on an individual’s job performance. These employees may feel betrayed or angry. They may also seek litigation or talk poorly about their experience to friends or online.

Career coaching and other outplacement services can take place virtually

To build goodwill, ease emotional distress and show exiting employees that their work was valued, companies may offer complimentary outplacement support. Outplacement services are an essential RIF unemployment benefit to help transitioning employees find new jobs. Through outplacement services, job seekers can receive support, including a freshly written, targeted and optimized resume and social profile, personalized career coaching and access to highly targeted job leads.

Outplacement is considered part of the RIF severance package, which may also include salary and health benefits continuation, vacation payout and other means to ease the transition. Looking for a new job that represents a lateral move or even a step up after facing a RIF can be overwhelming. Learning new skills to make a transition to a different career function or industry can be even more challenging.

Outplacement can offer hope and excitement as a transitioning employee begins to consider new avenues and beginnings — and also builds trust and appreciation for the former employer, even during departure. This goodwill will help the company maintain its brand reputation and safeguard against negative social media ratings on sites such as Glassdoor.

Another option to consider before, during, after or in addition to a RIF is career development. Career development services allow current employees to take charge of their careers, explore and expand their career possibilities and learn new skills or update existing ones. Employees will be better prepared to seek new opportunities internally or to be redeployed internally to where they can be most effective. Promoting internal mobility reduces hiring and rehiring costs for the company, preserves institutional knowledge, reduces time spent onboarding and builds loyalty among employees.

outplacement beyond RIF

Outplacement offers many lasting benefits for both impacted employees and the company long after a RIF.

A reduction in force doesn't mean a company stops supporting its employees' growth

A 2019 RiseSmart survey of 1,500 HR professionals from U.S. and abroad found that:

of companies that had a formal severance policy, half offered outplacement services
of those, 63% offered it to all non-exempt employees, based on factors such as job level, length of employment and performance
60 percent of all companies surveyed had redeployment programs to match employees with open internal positions
the number of organizations using redeployment as a talent mobility and retention strategy is up 14 percentage points from 2017

In some countries, it’s even more common. In France, companies with more than 1,000 employees are required to offer outplacement. According to Arnaud Courtier, France Directeur Général, RiseSmart, the most common practice is to ‘use an outside outplacement consultant instead of attempting to deliver these critical services through internal programs led by people who do not have the specific expertise to deliver successful outcomes.’

Outplacement can also help a company save money in the long run, well after a reduction in force. Employees who benefit from outplacement services can secure new jobs more quickly, meaning companies that offer these services will ultimately save on unemployment costs and lower unemployment insurance taxes.

Parting on good terms with exiting employees also helps a company retain its reputation as a good place to work. A poll from digital growth agency Fractl found that over half of respondents rated former employers poorly on sites like Glassdoor, while a third had turned down a job offer after reading a bad review.

Exiting employees who feel supported and find fulfilling employment quickly are less inclined to leave bad reviews or talk poorly about their former employers on social media, where the company will be judged in the court of public opinion. They may even continue to be a customer or brand ambassador within their network and, if an opportunity for rehire emerges in the future, they’re more likely to say ‘yes.’ A returning employee needs less training and guidance than a new candidate, which can drive additional cost savings.

Outplacement also positively affects employees who were not affected by the RIF. Following any kind of RIF or layoff, companies often see a decrease in productivity or higher turnover. This occurs for several reasons. Remaining employees who have to cover duties once performed by someone else may feel stressed or overburdened. They might miss colleagues they no longer see or feel guilty about surviving a RIF. They could become unsure about their own future with the company, which can lower productivity and lead them to seek employment elsewhere.

Losing high-performing employees — who may take years of experience or even clients with them — means incurring high costs to replace them, an endeavor only made more challenging by negative online reviews. A Glassdoor survey conducted online by The Harris Poll in 2018 asked respondents why they might pull out of a recruitment process. The top reason, at 44%, was finding out about a recent layoff, while 35% cited reading negative reviews from employees.

Offering outplacement during a reduction in force can show remaining employees that they will be cared for in the future should anything happen. These employees are more likely to stay, while top candidates will be easier to recruit if they perceive a job change as less of a risk.

Outplacement is just one solution to make everyone feel supported, even when a company is forced to make the hard decisions no manager wants to deliver. It may seem like a simple service, but its benefits are far-reaching and long-lasting during and after RIF.

For more on outplacement, read our blog, What is Outplacement?

what is a reduction in force (RIF), and what does it mean for you?

Reduction in Force (RIF) has become an unsavoury term that signals some employees' loss of income. Ideally, every manager would want to avoid using the term, but for many years a payroll reduction has been an almost inevitable part of balancing costs as a company approaches a decline. The aftermath of the covid-19 pandemic has caused major business upheaval and uncertainty for all sectors, many industries still are feeling the effects of this period.

Digital transformation has also reshaped work and workforces, and some technological advances and business transitions lead to the reduction of positions or a change in required skills. Hence, many organizations have to contemplate reducing their workforce to not just cut costs, but to reshape for the next business challenge.

Unlike furloughs and layoffs, where you intend to call back the employees when business circumstances change, RIF is a permanent removal of posts. Some layoffs and furloughs turn into a RIF if business doesn’t pick up for an organization again. And, many media outlets now refer to RIFs as layoffs, which only serves to confuse a wider audience.

considerations before conducting a reduction in force

Layoffs and reductions in force should be last resorts, but sadly they are all too often an easy way to make a reduction in expenditure. It’s a short term solution, and one that can significantly damage a brand’s reputation and standing - especially when it comes to hiring again. While many have been through a RIF, no two RIFs are the same. Unfortunately, not all companies execute RIFs without error — even when the actual cuts happen as planned, avoidable mistakes can have a lasting effect on employees who remain.

Companies use diverse methods to permanently reduce employee numbers. For instance, some encourage a voluntary reduction in force, where employees can opt to take early retirement or resign willingly. The company's management might also define the redundant positions and make a list of employees who are required to leave the workforce.

The reduction in force leads to cost savings, eliminates redundant positions, and streamlines business operations. However, it could also result in liability and litigation if the process is poorly implemented. Managers should conduct an impact analysis on the RIF to ensure it doesn't harm the company's reputation.

Determining the need for a RIF leads to some tough decisions for managers, but it's necessary to keep the business running. Before going for a RIF, you should explore options like furloughs and resizing or upskilling. Depending on the location of your business, some countries offer assistance to employers to avert layoffs and RIF. You should also consider exploring employee assistance programs like outplacement at an early stage, to help them transition.

what does the reduction in force mean for employers?

If your organization moves forward with a RIF, you need to plan your approach carefully to avoid negative fallout. For instance, it's important to know what to avoid during the RIF process to protect the company's image. Some of the activities that managers should undertake during the reduction in force include:

selecting employees for the RIF: a decision to reduce the workforce means managers need to evaluate the value and necessity of each position. The company should assess the value of work performed by every employee to maintain a high level of service with reduced employee numbers. Selecting employees for a RIF is the most difficult process managers face, and it requires objectivity. Aside from the relevance of the positions, employees' seniority and performance reviews also help decision-makers create a list of workers affected by a RIF. Use employees' skills to evaluate their alignment with the company's future goals. You should also avoid using biased criteria like protected conduct (for whistle-blowers) or leave status when reducing employee numbers.
avoiding disparate impact: during a reduction in force, you should be careful to avoid an adverse impact. Disparate impacts can occur when the employment practices are considered neutral but are discriminatory to a protected group. For instance, in regions where the workforce is comprised of different ethnicities, a disparate impact occurs when you select a large percentage of the minority group for the RIF. Protected classes usually include individuals of a particular race, ethnicity, religion, gender, and age (above 40 or 50, depending on the country). If a protected class has a disproportionately larger percentage affected by the RIF, it should be substantiated and evaluated to avoid litigation.We recently wrote a guide on supporting diversity through RIFs, here.
reviewing legislation: managers should analyze the possible legal implications related to a RIF decision to ensure compliance. It is crucial to review the state and federal laws of the country your company operates from to prepare for legal issues. For instance, in the United States, managers must adhere to the Worker Adjustment and Retraining Notification Act (WARN) which requires you to notify workers of an impending RIF sixty days before the mass RIF. In the UK, employers should be cautious to avoid age discrimination against workers over 40 years old. Some countries also have legislation that provides guidelines on the benefits and that employees are entitled to following a reduction in force.
determining severance and benefits coverage: deciding whether to offer a severance package is critical. While you may not be obligated to offer a severance package, it can benefit your business. In some countries, severance is a legal obligation when the terminations are due to the closure of a facility. Coverage can also work as a strategic move to lessen the impact on employees. For instance, severance packages reduce the chances of lawsuits and provide a fallback plan for employees to help them recover. The most crucial aspect of a severance package is the provision of outplacement services. An outplacement service helps preserve the morale of the remaining workforce and the company's brand.
informing the workforce: your communication plan will be under scrutiny during the reduction in force. You should prepare for the RIF meetings and decide how to communicate plans to directly impacted employees and the remaining workers. Consider notifying employees individually and answering any questions that arise. Aside from explaining the reasons for the RIF, ensure you provide information on available outplacement support and other severance benefits to help people move on. The remaining employees should also be informed of the RIF to limit anxiety. Communication is important for keeping your workers engaged.
dealing with changes to job responsibilities: you should communicate the company objectives after a massive RIF and explain the changes in the company structure. When many employees leave due to payroll reduction or redundancies, it is essential to develop long-term solutions to improve employee engagement and boost morale. For instance, you should review the job descriptions of the remaining employees and adjust them to the new company structure. The changes can make the organization more efficient and profitable. Since some workers will perform additional tasks, is a pay increase feasible? You can consider cross-training employees on other tasks to improve efficiency.

the impact of a reduction in force

While a reduction in force is a valid response to adverse business situations, its effects shouldn't be downplayed. How you handle employees during the process can affect your business permanently. Your company practices and culture are displayed on social media sites and job review platforms. Hence, how you deal with a reduction in force will be in the public domain. For instance, the CEO who fired 900 workers via Zoom attracted a huge amount of negative press and revealed their poor management practices. Such actions create adverse public perceptions, which can damage trust in your company.

Here are some of the effects of a RIF:

reduced trust in your organization: since a reduction in force makes headlines in some countries, stakeholders, social media followers, and the wider community will form an opinion on how you handle your outgoing workforce. If you don't treat the laid-off workers with respect and dignity, some customers will lose confidence in your company. You also need the trust of surviving employees to move forward with confidence. Lack of transparency and communication breakdown during the reduction in force can lead to fear and uncertainty. You risk losing your team's trust in your company, which leads to lower productivity.
increased turnover: while the person impacted by a RIF experiences emotional distress, the remaining workers also suffer. You should not expect your employees to be grateful for not losing their jobs. The terminated employees are their friends and colleagues, and downsizing leads to survivor's guilt. In addition, a reduction in force disrupts the status quo, and the remaining workers have to pick up extra duties. A study by Leadership IQ shows that 74 percent of workers who kept their jobs after a RIF claim their productivity declined. Lack of trust and morale makes greener pastures more tempting and increases employee turnover.
damage to your company's brand: having a poor online reputation and negative reviews affect your corporate image. Customers and employees are influenced by what they see online, and negative reviews or press after a reduction in force attracts the wrong kind of attention. When you expand, any negative reviews from employee terminations come back to haunt you. Many companies with poor online reviews have a difficult time attracting the best talent. Potential candidates will check your social media pages and online reviews to learn about your company. Are there articles that could make them think twice about joining your workforce? Investing in your brand and maintaining the dignity of employees during a RIF conveys the right message for your future employees.
emotional distress: reduction in force causes emotional distress, feelings of anger, and depression for the terminated workers. Employees will lash out if they feel the process wasn't fair and the RIF was conducted without respect and appreciation. That means you could spend a lot of money fighting lawsuits over unlawful terminations or paying claims from the lawsuits. Handling the process with dignity and sensitivity minimizes emotional distress for all parties.

how outplacement can reduce the adverse effects of RIF

When a reduction in force is inevitable in your company, make the process easier and less distressing for your employees. You can protect your company's reputation during layoffs with the right approach and employment assistance programs. Most companies soften the blow of a reduction in force by offering severance packages that include inclusive outplacement support.

While you cannot guarantee job placement after the reduction in force, outplacement support helps terminated employees make career transitions. Some of the benefits of outplacement services that reduce the effect of a RIF include:

empowering affected employees: workers are usually deeply unsettled by a reduction in force. Even if you make efforts to notify them early in the process, the finality of their last day is still a shock. When you offer outplacement support, you give the affected employees a lifeline during uncertain times. An outplacement service offers your workers something to focus on and enables them to move faster to the next stage professionally. Outplacement service providers usually offer tools for professional development. Inclusive outplacement support also allows employees to define their passions and helps them determine their next step.
expert coaching is invaluable: losing a job causes an emotional rollercoaster for an employee. A career coach will help them deal with their emotions and move forward. Some workers affected by a RIF have been out of the job market for some time, and their current skills may be redundant. Working with expert outplacement support enables them to explore their career prospects. A specialist coach helps them explore their professional goals and identify opportunities for building their career. Personalized support speeds up their career transition to other roles.
speeds up the career transition process: working with an outplacement provider during career transitions speeds up the job search process. For instance, most outplacement support services include CV writing and resume review services to improve the likelihood of landing a job. Career coaches also offer interview preparation coaching and support employees facing difficult transitions. If your workers anticipate a difficult transition due to the industry they work in, outplacement support can provide specialized services to aid them.
networking advice and positive reinforcement: losing a job sometimes leads to interest in a career change. Some employees choose to pursue a career in other industries or go freelance. An outplacement provider helps them identify a career path and guides them to pursue it. For instance, a career coach can offer networking advice and strategies to help them secure jobs. If an employee requires positive reinforcement due to anxiety and depression, outplacement services provide counseling to help employees vent their concerns.
outplacement is good for your organization: offering outplacement services after a reduction in force is good for your business image. It builds your employer's brand and helps you attract the best talent in the future. When you ensure exiting employees are focused on their career transition, you reduce the adverse impact on your social reputation and company brand. You will have fewer disgruntled employees and fewer lawsuits, so you can focus on building your business. Providing outplacement support also creates security for survivors by reducing the anxiety caused by unexpected RIFs. Employees will be motivated to continue working in the company knowing their colleagues receive support in finding new jobs.

You can explore additional information on handling reduction in force on our HR advice platform. Check out our guides on outplacement support for your employees.