How to support psychological safety when laying off an employee

As organisations navigate the delicate process of downsizing or laying off employees during restructuring, it is imperative to adopt strategies that not only execute the transition effectively but also uphold the dignity and mental health of the person or people who are being laid off.

It is also just as important to support the psychological safety of remaining employees and the reputation of the company at large.

Protecting psychological safety during a lay off

The psychological impact of being laid off can be complex, and employers should prioritise protecting the wellbeing of an employee in the process of delivering this news and handling the fallout.

Workplace Culture Institute of Australia Managing Director Kirstin Skinner said there were some particular psychological hazards, which employers should focus on, as they would most acutely affect the leaving employee.

“The primary hazards in a circumstance like layoffs are low job control, poor support and poor organisational change management,” Ms Skinner said.

To ensure an employee has a maximised sense of job control, Ms Skinner recommended making sure employees were informed – ahead of the public – of the company’s position leading up to the consideration of company layoffs.

When addressing the other two primary concerns, she said prioritising communication was also key.

“Educating leaders of the organisation with how to have difficult conversations and investing in leadership training for resilience should be considered for the psychological hazard of poor support,” she said.

“Should layoffs be considered, consultation forums where employees are provided a platform to ask questions and receive responses and feedback as to why the strategy of layoffs are considered is important for the psychological hazard of poor organisational change management.”

Ms Skinner said, ultimately, ensuring the employees were well informed on the reasons they were being laid off while also introducing and reminding employees of the company’s employee assistance programs could help to reduce all three primary hazards.

Helping the employee into their future

Aiding an outgoing employee in their future job search is essential to promoting their psychological safety.

Ms Skinner said there were simple steps a company could take to make sure a laid off employee was on the right path to a brighter future.

“Assuming the company has already considered the skills and experience of the respected employees, who are being laid off, for other positions in the business, there are several initiatives which can be pursued to support the employee,” Ms Skinner said.

“Leaders can provide outgoing employees with a written reference to ease the job search and payroll can provide a letter of separation to ensure the employee has a reduced waiting period if Centrelink needs to be considered for income while on their job search.

“An information sheet should be sent to employees, which educates individuals on the government support system available, platforms for job search engines and helplines to assist with questions.

“Other pursuits of assistance include helping the employee with their curriculum vitae and calling in to check on the individual shortly after they leave the company.”

Ms Skinner said empathy should drive company behaviour during layoffs.

She said employers should consider what they would need to feel respected and supported if they were going to lose their own position.

Quelling anxiety among the remaining employees

While the potential psychological hazards of being laid off are abundant for the employee or employees being let go, Ms Skinner urges companies to be aware of the risks posed to the psychological safety of the employees who remain.

“In my experience, the most common challenge organisations face in maintaining psychological safety during layoffs isn’t the employees who are laid off, it’s the employees who keep their positions with the company,” she said.

“Employees become aware that their permanent position doesn’t exercise the job security they had once believed it had and can feel unsafe to speak up with fear of also being considered to be laid off.

“Creating an understanding through information sharing from the company’s senior leadership of why the layoffs are considered and sharing – organisation wide – the positive effect the decision will have on the company can assist in mitigating psychological hazards developing among remaining employees.”

How this impacts the company

Laying off an employee stands to spoil an otherwise positive experience at a company for the person affected, which will not only negatively impact the former employee’s mental health but may also sour their perspective of the company at large.

According to Ms Skinner, is it important companies directly protect the individual’s psychological safety to safeguard the reputation of the business at large.

“With layoffs, the thing the leaving employee remembers most about their experience with the company is the way they were treated when they left.” 

“This is as a result of the recency effect, where people tend to recall the most recent information more accurately," Ms Skinner said.

“By managing psychological hazards by endorsing psychological safety, employees are more likely to leave the company with a positive memory and favourable feeling about their experience, allowing a positive representation of the company being upheld.

“Should an employee’s mental wellbeing not be considered during layoffs, the biggest risk to the organisation is the damage which can be done to its reputation.

“Like trust, reputation takes time to build the designed brand image but can be quick to damage.

“Once damaged, the journey to build again can take longer.”

Company culture as a predecessor to successful layoffs

Planning long term, the complicated process of safeguarding the psychological safety of employees throughout the layoff process while also protecting the reputation and integrity of your business should begin with a company culture where psychological safety is prioritised from the outset.

According to Ms Skinner, competency among leaders is a crucial component to protecting psychological safety during layoffs throughout the company.

“Prompting psychological safety within organisations is too often considered to be a response to a crisis like layoffs, but I encourage all business owners to get on the front foot and determine potential psychological hazards in their workplace as a proactive response, rather than a reactive response,” she said.