Know the difference between being fired vs being laid off?

What's the difference between being laid off (or made redundant) vs fired (or terminated)?

“Laid off” and “being fired” are occasionally used interchangeably, but they’re different. When the business environment changes, a company can choose to initiate redundancies. For example, they may be abandoning a market due to economic downturn, or retiring a product line to pursue a different one. Lay-offs, in short, bear no reflection on the workers involved. As a result, they’re far more common than being fired.

In the UK, for example, some employment contracts allow employers to lay off¹ employees when they cannot be utilized. In this case, they will stay at home, often on unpaid leave. In New Zealand, there is no legal right for redundancy.² Organizations can adopt a redundancy provision in the employment contract. This is common at government agencies and businesses with unions.

On the other hand, employees are fired due to specific reasons, such as poor performance, behavior, or attendance. Employees typically receive a warning, such as a Performance Improvement Plan (PIP).³ If the offense is egregious, such as any involving violence, theft of company property, or breaching company policy, the employee may be fired immediately.

Some markets give more leeway to what employers can fire employees for. In the United States, the most common type of employment is at-will.⁴ For this type of engagement, employees must sign a waiver that acknowledges they are hired “at will.” As a result, the organization can fire them for any reason. Even if a fired employee seeks loss claims in court, these will usually be denied.

To summarize, here are the key differences between being laid off and fired.

For both layoffs and terminations, human resources must give notice. The exception is for flagrant offenses.

In New Zealand,⁵ employers must give “reasonable notice." This will vary based on tenure, seniority, remuneration, and employability. In the UK,⁶ the written notice must include the notice period, leaving date, the redundancy pay, and how it was calculated. Some even provide employees with an avenue to appeal the decision. In Australia, employees have the option to work during the notice period.⁷ Alternatively, they can start a terminal leave that includes a lump sum payment that tops up their final check and any redundancy pay. The minimum notice period will depend on how long the employee has worked at the company.

Not every rationale for the job loss is lawful. There are quite a few instances that would be the basis for a wrongful termination claim or unfair dismissal. These include whistleblowing, retaliation, and discriminatory reasons. In this case, it's best to consult with employment lawyers.

If the reason is legitimate, you should request a formal letter. This will provide details about your job title, tenure, roles and responsibilities, and job status. You should then exit the company gracefully. Make sure to not disparage the company, your boss, or your colleagues. This is not only to maintain a good relationship with them, but to keep a good reputation in your industry. No one wants to get a reputation as a disgruntled, laid-off employee.

At this point, employees should only look in one direction: forward. You should focus on what you can do to leave on good terms with your previous employer. Employees should properly complete turnover. You should also find out how to get your final pay, including whether you can cash-in any unused vacation days. You should start taking steps to improve your future employment prospects by upskilling yourself.

What severance and benefits am I entitled to?

If you’ve lost your job, you may be eligible for two types of benefits. The first are unemployment benefits, which are provided from the government. The second is severance pay, which will come from your organization but may be regulated by law.

U.S. Department of Labor says that unemployment benefits are provided by the state that you live in. The compensation will vary and be based on your income. To be eligible for these benefits, you must meet a minimum tenure working with the organization. The other eligibility requirements will be posted on the state’s website. If you qualify, you’ll be advised what unemployment benefits you’re eligible for and how to collect them. During periods of economic crisis, the government may increase these benefits. Within the Fair Labor Standards Act, there are no legal guidelines for severance pay. Nonetheless, some companies may provide severance as part of your employee benefits.

In New Zealand, people who lose their jobs are eligible for Jobseeker Support.⁸ While these benefits will also be based on your previous work and income, you must be actively seeking work. Unemployed people must be searching for any work. Part-time workers may search for additional or full-time employment. Some New Zealanders may be unable to work due to illness or redundancy. These citizens will also receive a family tax credit from the Inland Revenue during jobseeker support. There is no requirement for severance or redundancy pay. You are only entitled to these if outlined in the employment agreement.

In Australia, there are two types of benefits, each determined by a person’s age. Australians between 22 and pension age can receive Jobseeker Payment⁹ if you’re looking for work. Like other unemployment compensation, this can also be extended to people unable to work due to illness or injury. Australians between 16 and 21 are also eligible for a youth allowance. To receive this benefit, you must either be independent or qualify based on a parental income test. You must also be searching for a job or be unable to work.

Australia also makes the distinction between genuine redundancy and non-genuine redundancy.¹⁰ A genuine redundancy occurs when a job is no longer needed, so the employee must be laid off. Remuneration for a genuine redundancy may include a gratuity and severance. If the employer fails to give you notice, they must also pay for the minimum notice period at your full time rate. A non-genuine redundancy can occur for a variety of reasons, such as retirement, resignation, or dismissal.

In the United Kingdom, there are several avenues for unemployment benefits. The first is the Rapid Response Service. While the RRS takes a community approach to unemployment, it also gives funding to job seekers. The second is the New Style Jobseeker’s Allowance (JSA).¹¹ JSA benefits will vary based on your age and are directly credited to a bank account. To remain in good standing with JSA, you must commit to an agreement that you’re looking for work.

Severance is also not legally required in the UK, but redundancy pay is. Employees must have been with the company for a minimum of two years, and pay is based on both your tenure and age. A person 41 and over, for example, would get 1.5 weeks’ pay for every year with the company. Employees that are made redundant may also be eligible for other benefits. These may include time off to look for new employment, or even the option to move into a different position at the company. Redundant employees may have even more rights if the layoff is due to the employer going bankrupt.¹²

What do I do next? The business side of getting back on track

Because many people have been in your shoes before, there are best practices you can follow to get back on track. You should follow these to minimize the anxiety that may come with looking for a job.

1. Prior to unemployment, an employer must provide written notice

This will generally state the effectivity date, rationale, and remuneration if any.

2. If you’re eligible, you should ensure you’ve received your severance package

It’s important to note that in some markets this is not only compensation. In the United States, outgoing employees may be able to remain in their health insurance program. This is accomplished through COBRA Continuation Coverage.¹³ This coverage period usually lasts anywhere from 18 to 36 months. The one caveat is that you are fully responsible for paying the premium and a 2% administrative fee.

3. To collect your final paycheck, you should complete the proper turn-over with your company

This may include turning over deliverables, wrapping up projects, and documenting processes. Rather than do these half-heartedly, you should do them to the best of your ability. This ensures you remain in good standing with the organization and any colleagues. You should always take this higher ground, even if you have a coworker who is difficult.

4. You should research whether you qualify for unemployment benefits by checking government websites

If you do, gather your personal documents and any additional requirements, such as proof that you’re searching for a job when you visit the unemployment office. This may include a hard copy of your applications or any correspondence with potential employers.

5. Before you begin your job search, you should collect professional references

A letter of recommendation may be especially necessary for your situation. Some hiring organizations may look to de-risk themselves with social proof of your capabilities. These professional references can even come from your former employer. A direct supervisor, who can attest to your work, is always the best choice. Ideally, you would have built a strong working relationship with your past supervisors, so they can enthusiastically recommend you.

6. Reach out across your personal and professional network for any employment opportunities

You can do this task over email or LinkedIn. While most people you ping will not be actively hiring for a relevant position, alerting them to your job search is still beneficial. You may be top-of-mind when a job does come up. Then they can refer you to the hiring manager at their organization. Organizations like referrals because they make for better candidates.

7. Review your household budget and cut or pause any non-essential costs where you can

Any items that take up excessive time, such as Netflix, may merit special consideration because these can represent a two-fold loss. One, there is the opportunity cost of taking time away from your job search. Two, these may lead to the loss or reduction of your unemployment benefits if you’re not active in your job search.

8. Update your resume or CV

One of the best ways to do so is Canva, which provides numerous templates that you can further customize. To stand out from other job seekers, you can add multimedia to your resume, so it’s not just a wall of text. You may want to add a visualization representing your proficiency in different technical skills. You may also link to a creative portfolio. Soft skills may be worth noting if you haven’t listed them already.

9. Even if you don’t have an interview scheduled, you should start preparing

Since there are only so many questions that an interviewer can ask, you should practice the most common ones. Many of these are behavioral questions (i.e. “Can you tell us about a time you made a mistake at work?”), so you should be ready to cite a specific experience and reflect thoughtfully about it. You should also prepare to answer motivational interview questions.

10. The last step is the most fun: start your job search on LinkedIn and other job search platforms

Somewhere among the thousands of listings is a job that is perfectly suited for you, at an organization that can help you grow. Now you just need to find this opening, take a deep breath, and apply.

What else can I do? The wellness side of getting back on track

Losing a job and searching for a new position is not only a professional endeavor - it is also a deeply personal one. You must be in the right frame of mind to get your career journey back on track. The first step here is having a positive thinking. Rather than view the job loss as a failure, you can look at it as an opportunity. You now have the freedom to reflect on what type of career you really want. Some may want to move into a different functional expertise, others may want to shift into a different field, and still others may want to do both. You’ll never know until you sit down to think.

If you need a model to help, you may consider the Japanese concept of ikigai.¹⁴ This value encourages people to pursue work at the cross-section of four distinct needs. You love doing it, you are good at it, you can be paid for it, and last but not least, the world needs it. With time off work, you can prepare to find your ikigai.

Getting into this positive frame of mind is of course easier said than done. That’s why it’s essential to incorporate different wellness behaviors into your daily routine. One avenue is visualization. You can imagine yourself working away at your dream job in your dream organization. This will help you stay focused on what it will take to not only get there, but to achieve the rest of your professional goals.

Another beneficial habit is opening yourself up to coaching. Receiving advice and feedback from someone who has been there will accelerate your growth. Unfortunately, a personal career coach is cost-prohibitive for most people. To democratize access to this type of learning, we offer a free Vital Wellbeing coach program that lasts nine weeks. You can also strengthen your state of mind through our mental wellbeing app. F4S provides access to career resources to help your journey.

Taking care of your emotional and mental wellbeing will ensure you’re in the best position to find the job you deserve.