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Top 10 Reasons for Company Layoffs

The main difference between being fired and being laid off is the reasoning behind the termination. When a company fires employees, it’s generally on an individual basis because of poor performance, inappropriate behavior, or a whole host of other problems with the employee. Layoffs occur because of a problem within the company. Often it’s because of economics, but other factors can play a role as well. Here are 10 common reasons for company layoffs:

  1. Cutting Costs
    When a company needs to save money, employees, which are a fixed cost, are one of the easiest things to get to rid of. The money can then be reallocated to other areas the higher-ups deem more necessary.

  2. Lack of Funds
    It’s also possible that the money doesn’t need to be reallocated -- it simply may not be there. When there’s no business, there’s no money. When there’s no money, there’s no way to pay employees. Even if workers weren’t getting laid off, they certainly wouldn’t stick around to work for free.

  3. Lack of Work
    Business isn’t always booming. For companies like factories, orders may not always come in as great a quantity as they once did. When the work isn’t there to be done, employees can’t be kept to do nothing.

  4. Relocation
    Sometimes companies move to entirely different locations. They may be trying to reach new clients or looking for better opportunities or cheaper real estate. But often, the company moves because research shows the new area’s workers are more appropriately skilled for the job, and so they leave their old employees behind.

  5. Mergers
    When two or more companies join together, everything changes. Specifically, what was a two-company job pool becomes a one-company job pool. There just may not be enough room to keep everyone.

  6. Buy-Outs
    If someone new takes over a company, it can completely change the goals and strategies of the business. When this happens, new management may decide a vast change in the workplace is needed; old policies and procedures become outdated, along with a large part of the original employees, who no longer fit with the new business model.

  7. Outsourcing
    Companies often realize they can buy products at half the price by changing their vendor to a different company. Likewise, business leaders may find it much more cost effective to use workers from another business, rather than employing people on their own.

  8. Termination of Projects
    When a company finds that some of their products aren’t selling as well as other products, they may close down that particular part of their company. While some of the workers from the ended project may be moved over to increase productivity on the successful product, there may not be room for everyone.

  9. Changing Standards and Policies
    Sometimes the stipulations of a specific position may change, often due to a change in state or federal regulations. For example, where the job once required only a high school diploma, it suddenly requires a bachelor’s degree. If the employees under that position no longer fit the requirements and aren’t willing or able to do what it takes to fulfill them, the company has to let them go.

  10. Technological Progress
    Many people find themselves being replaced by advancements in robotics. Buying a machine to do the job of three people drastically changes the revenues of the company. They can make one bulk purchase and pay one mechanical technician’s income to keep the machines running indefinitely, instead of paying a group of people’s yearly salaries over and over.

Last Updated: April 27, 2015