Layoff is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees for business reasons, such as the decision that certain positions are no longer necessary or a business slow-down or interruption in work. Originally the term "layoff" referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. However, the term has also applied to the permanent elimination of positions as a cost-cutting measure (or for other reasons).
Further euphemisms are often used to "soften the blow" in the process of firing and being fired, including downsize, rightsize, smartsize, workforce reduction or workforce optimization, simplification and reduction in force (also called a "RIF", especially in the government employment sector). Mass layoff implies laying off a large number of workers. Attrition implies that positions will be eliminated as workers quit or retire. Early retirement means workers may quit now yet still remain eligible for their retirement benefits later. While redundancy is a specific legal term in UK employment law, it may be perceived as obfuscation. Firings imply misconduct or failure while lay-offs imply economic forces beyond ones control.
Many employers reserve the contractual right to send employees home for short periods without pay when work is scarce. (Although it is rarely used outside the manufacturing sector.) If this right is indeed reserved in the contract of employment, then the employees aren't entitled to immediately seek compensation in the Employment Tribunal.
However, if an employee is laid off for 4 continuous weeks, or for 6 weeks within any 13 week period, he is entitled to give his employer notice and claim a redundancy payment in the employment tribunal.
However, when most lay people in the UK talk about being "laid off" they actually mean that they have been made redundant. In UK employment law, redundancy is the dismissal of an employee when his or her job becomes unnecessary. UK redundancy law allows three reasons for redundancy:
On occasions an employer will need to reduce the staffing numbers of a group of employees who all undertake similar work. In these circumstances the employer should consult with the workforce representatives to agree the criteria for selecting those employees who will leave. The group of people from whom the selections will be made is termed the `redundancy pool`. A good employer will attempt to minimise the effect of the redundancies by seeking volunteers who wish to leave.
The law requires the employer to make a statutory redundancy payment, which is tax-free and is based on the employee's length of service, as long as the employee has served a minimum of two years. The employee isn't allowed to claim redundancy if he or she was offered an alternative position with similar salary, status and responsibilities.
U.S. manufacturing companies have also increasingly shifted production overseas, closing down factories in the U.S. and establishing factories and assembly plants in Latin America, the People's Republic of China, Vietnam, etc., or using manufacturing sub-contractors owning such facilities. U.S. manufacturing and service companies have also opened call centers in India or sub-contracted with companies owning such facilities.
Certain countries (eg. France), distinguish between leaving the company of one's free will, in which case the person isn't entitled to unemployment benefits and leaving the company voluntarily in the frame of a RIF, in which case the person is entitled to them. An RIF reduced the number of jobs, rather than laying off specific people, and is usually accompanied by internal redeployments. A person might leave even if their job isn't recuded, unless the employer has strong objections. In this situation, it's more beneficial for the state to facilitate the departure of the more professionally active people, since they are less likely to remain jobless. Often they find new jobs while still being paid by their old companies, costing nothing to the social security system in the end.
This has also spawned the opposite term upsize, which means to grow, expand or purchase something larger.