---
title: "Thinking About Layoffs? Here’s What Employers Need to Know"
date: 2025-06-03
author: "siteadmn"
featured_image: "https://contempohcm.com/wp-content/uploads/2025/03/2025-0313-Contempo_Employers_Guard-against-high-401k-fees-with-a-benchmark-analysis-1.jpg"
categories:
  - name: "General Business"
    url: "/category/general-business.md"
tags:
  - name: "COBRA"
    url: "/tag/cobra.md"
  - name: "hiring"
    url: "/tag/hiring.md"
  - name: "leadership"
    url: "/tag/leadership.md"
  - name: "OWBPA"
    url: "/tag/owbpa.md"
  - name: "WARN"
    url: "/tag/warn.md"
---

# Thinking About Layoffs? Here’s What Employers Need to Know

Layoffs have dominated headlines in 2025, with both public and private sector organizations making tough workforce decisions. As economic uncertainty continues, many employers are considering reductions in force as a cost-saving measure. But layoffs are complex — financially, legally, and operationally.

If your business is exploring this option, careful planning is essential. Here are key factors to evaluate before moving forward.

## Understand the Full Cost of Layoffs

While reducing headcount may seem like a quick way to cut payroll costs — typically one of the largest line items for most employers — layoffs can trigger significant **short- and long-term expenses**.

### Direct costs may include:

- Severance packages, especially when tied to liability waivers
- Unemployment claims, which can increase your insurance rates
- Final pay obligations such as accrued PTO

### Indirect costs can include:

- Time spent on offboarding tasks like exit interviews, collecting company property, and compliance checks
- Training for employees taking on redistributed workloads
- Future hiring and rehiring expenses if business rebounds
- Decreased morale and increased turnover among remaining staff

**Tip**: Before making cuts, re-run your financial projections. Consider cost-saving alternatives such as furloughs, reduced hours, or freezing new hires.

## Know the Legal Requirements

Workforce reductions carry legal risk, especially if they impact protected groups or violate notification requirements. **Avoid litigation and compliance missteps** by consulting legal counsel and reviewing applicable laws, including:

### Key federal regulations:

- **Older Workers Benefit Protection Act (OWBPA)**: If employees 40+ are affected, they must be given at least 45 days to review severance agreements, plus a 7-day revocation period. You must also provide age and role disclosures for those affected and not affected by the layoff.
- **WARN Act**: Employers with 100+ employees may need to give 60 days’ notice for mass layoffs or plant closures. Many states have their own “mini-WARN” laws with stricter requirements.
- **COBRA**: Laid-off employees generally must be offered continued health coverage. Noncompliance can result in penalties or lawsuits.

Documentation is key. Ensure every step of your layoff process is clearly recorded and legally defensible.

## Consult With Strategic Advisors

Layoffs aren’t just an HR decision — they have **long-term implications** for your financial health, company culture, and legal exposure. In addition to legal counsel, consult with financial and tax advisors.

We can help you:

- Evaluate the real financial impact of layoffs
- Explore cost-saving alternatives
- Structure severance packages that are compliant and tax-efficient

Before making a final decision, be sure it aligns with your broader organizational strategy.

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