Being Laid Off vs Fired: How to Handle Either Situation

Involuntary job loss is a tough experience! I’ve been laid off twice, and I know.

If your employment was ended, you were either fired (a.k.a. “terminated” or “sacked”), or you were laid off, unless you quit or resigned voluntarily.

Laid Off vs. Fired: Why the Difference Matters

It is important to understand the difference between these terms for some very important reasons:

  • Explaining to someone (a potential employer, network contact, friend) why you are job hunting.
    • Being fired has a more negative connotation to it than being laid off.
  • Being fired means no “severance package” from the employer.
  • Qualifying (or not) for unemployment compensation.

Because management isn’t perfect, good employees are laid off, and good employees are also fired.

Neither process is as logical and well considered as most people assume (ever have a bad manager?). Although it seems illogical, employers implementing layoffs very seldom take the time or effort to determine which employees are high performers who should be retained and which are low performers who won’t be missed.

Often, the tendency is to layoff the expensive employees and keep the cheaper ones.

My own experience with layoffs showed no particular logic was involved in choosing who stayed and who was let go. The decisions were usually made too quickly, with effort sometimes expended trying to avoid age, race, gender, or other appearances of discrimination.

Be Sure to Use the Correct Terminology

Especially if you have been laid off, do NOT consider yourself “fired.” Your employment ended because of bad luck — you were in the classic “wrong place at the wrong time” situation.

If you were fired, do not represent yourself as “laid off” because an employer checking references may discover the truth pretty quickly. But, do put your job loss in the most positive terms.

More on how to respond well to job interview questions below.

What Is a Layoff? Definition & Meaning

Being laid off is NOT the same as being fired because it is not considered to be the fault of the employee. It is, actually, the fault of the employer.

A layoff is often called a “reduction in force” or “down-sizing” and usually more than one employee loses their job. Outside of the USA, a layoff may be called a “redundancy.”

Sometimes, it is euphemistically called “right-sizing” by management and/or Wall Street.

A layoff is usually the termination of a group, or part of a group — from two or twenty employees to hundreds or thousands of employees:

  • Sometimes all of the employees who are laid off work in specific divisions which have been designated as over-populated or excessively expensive.
  • Sometimes the layoff may focus on the employees in a few job titles or a specific location.
  • Often when one company acquires another company, many of the employees in the acquired company are laid off because the acquiring company already has people doing those same jobs.
  • Sometimes everyone is laid off as the employer ceases operation and shuts down permanently.

Somehow, this often seems to translate into the older and/or better paid employees being chosen for the layoff. Since the reason for the layoff is usually expense reduction, this isn’t surprising.

Why Layoffs Happen  

Since employee salaries and benefits are often the biggest item in an employer’s budget, that is often the budget item that is singled out for reduction.

The cause of the layoff is typically a change in the employer’s financial strength or a new direction for the corporate strategy.

These reasons have nothing to do with the employee unless the employee is in senior management, responsible for the bad decision or situation.

How Employees Are Selected to Be Laid Off  

While it may be logical for employers to lay off their least productive employees, often sections of the company are required to “cut” 5% or 10% (or whatever) of their staff, usually stated in terms of budget dollars. This is often the reason that more highly-paid employees seem to be on the layoff candidate list.

Employees are not usually carefully selected for layoff because of their performance, although people who have not been through a layoff may not understand that.

Consequently, unless the layoff is a big news item across the local area, an explanation in a job interview or networking discussions helps make the situation clear, when done nicely (turn off the anger!).

What to Do If You Are Laid Off  

In my last layoff, the rounds of layoffs continued for about five years before the company was acquired by a competitor which then did an even bigger round of laying off staff.

Don’t assume that your job is safe if your employer has had one or two rounds of layoffs, but you are still employed there.

My recommendation is to very seriously consider leaving before they eliminate your job.

When the employer finally goes out of business and the last employees lose their jobs, you will not be rewarded for your loyalty by prospective new employers. They will assume that you stayed because no one else would hire you, not because you were trying to help your employer recover and prosper. So, unfortunately, you will have a tougher job search after your layoff.

Ask for a Severance Package  

Often, laid off employees are be offered a severance packages.

Severance varies by employer, situation, and location.

It may include a continuation of your standard pay for a few weeks or months, outplacement services which include assistance with finding a new job, perhaps continuation of insurance for a period of time, and other benefits that are important to you.

If a severance package is not offered, ask for one.

Outplacement services can be very helpful today with all of the changes in recruiting technology and methodology. You may also be able to negotiate training, tuition assistance, and other payments to help you pay your bills until you land your new job.

If you have accrued vacation time that you have not taken, you should be paid for that time.

How to Discuss Your Layoff in a Job Interview  

According to many studies, the worst thing to do is to say negative things about a former employer, even though they laid you off.

Be prepared with an unemotional, rational explanation of your layoff.

Here’s an example:

At Example Co, demand for one of our main product dropped quickly and dramatically when a competitor introduced popular new technology. So, management determined that they needed to reduce the workforce to eliminate related expenses. Since my department was responsible for maintaining the equipment used to produce the failing product, the department was decreased to two people and seven of us were laid off.

Layoffs happen relatively often. For example, in May of 2013, the last year the U.S. Department of Labor tracked “mass layoffs,” there were 1,300 layoffs with more than 50 employees laid off in each.

[For more sample answers, read: How to Answer: Why Did You Leave Your Last Job — After a Layoff?.]

What Is Being Fired? Definition & Meaning

Being fired is a fairly common experience, unfortunately.

Being “fired” is a permanent termination of employment, generally “for cause,”.

The cause is usually attributed to the employee’s poor performance although often poor management or other issues may be the real reason, even if no one admits that..

If you’ve been fired, don’t panic. But, do be prepared to explain it very carefully to future employers. Maybe a new manager wanted different staff. Or, you had “bad chemistry” with management or customers. Or, a thousand other reasons exist, some legitimate and some not.

The “cause”:

  • Your performance was not good enough.
  • The job was not a good match for you.
  • The job, management, or something else changed and the change was not a good match for you.
  • You did something considered inappropriate or dishonest.

As with a layoff, explain why you were fired without trashing your boss, co-workers, customers, or the organization, and focus on the future. For example:

The nature of the work I was doing in my last position really did not suit my strengths. But, I learned from that experience. So, I’ve done more analysis of both myself and this organization. This job is a much better fit for me because… [add the reason you are well-qualified for the job you are interviewing for].

[For more advice and more sample answers, read How to Answer: Why Did You Leave Your Last Job — After Being Fired? and How Employers View You Being Fired.]

In the USA, employers can usually fire you without providing a reason, because in most states (not all!) you are an “employee at will.”

Unless you have a contract that specifies you will work for a specific period of time, you are an “at-will” employee who can lose their job at any time for any legal (or, sometimes, illegal) reason the employer chooses.

Even employment contracts may be terminated by the employer, depending on the language in the contract and the laws in that state or country.

An illegal reason to fire you could be many things including firing you because of your race, age, or because you reported the employer to authorities for doing illegal things.

If you think you may have been fired illegally, look for an attorney who specializes in employment law, but don’t expect a quick fix to the problem.

Can you collect unemployment if you were fired?

Generally, to qualify for unemployment compensation in the USA, you must be unemployed due to reasons beyond your control.

Typically, that means an employer reorganizing or going out of business.

The assumption (true or not true) 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. However, qualifying for COBRA health insurance usually applies regardless of how you lost your job.

The exact rules do differ by state, so, when in doubt, apply for the compensation.

What Is COBRA?

Not a snake, in this context.

In the USA, COBRA stands for the Consolidated Omnibus Budget Reconciliation Act, the name of the law the Congress passed which took effect in 1985 established extended access to medical coverage for former employees.

COBRA is a program that allows both laid off and fired employees to stay in their employers’ health insurance program after they have left employment. The employer no longer pays any portion of the insurance premium, however.

With COBRA, the employer no longer contributes anything to cover the cost of the insurance. The former employee is responsible for paying the total monthly premiums and can retain the insurance for up to 18 months. However, you must sign up within 60 days of losing your job (and pay for those 60 days of insurance).

More Information on Surviving Job Loss:

Susan P. JoyceAbout the author…

Online job search expert Susan P. Joyce has been observing the online job search world and teaching online job search skills since 1995. A veteran of the United States Marine Corps and a recent Visiting Scholar at the MIT Sloan School of Management, Susan is a two-time layoff “graduate” who has worked in human resources at Harvard University and in a compensation consulting firm. Since 1998, Susan has been editor and publisher of Follow Susan on Twitter at @jobhuntorg and on Facebook, LinkedIn.
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