Reduction in Force (RIF)
Table of Contents
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Table of Contents
What Is a Reduction in Force (RIF)?
A reduction in force (RIF) happens when a company permanently eliminates positions. A RIF is different from a layoff or furlough. Layoff and furloughs are temporary, while a RIF is a permanent position elimination.
Reasons for a Reduction in Force (RIF)
There are several reasons for a RIF, both monetary and structural. Here are a few reasons why a company may consider a RIF.
- Financial hardship. In times of economic downturn, companies may make the decision to reduce headcount in order to stay profitable and keep their doors open.
- Underperformance. With a RIF, a company can cut their losses. In order to strengthen their balance sheet a business unit or product line that is consistently in the red may be part of a RIF.
- Company merger. During mergers or acquisitions, reviews take place to evaluate headcount needs. If post merger or acquisition there are 30 accountants when only 20 are needed, then there is typically a RIF.
- Location closure. In some cases, entire locations are closed if the company location is unable to withstand competition, supply chain issues, or production quotas.
HR’s Role in a Reduction in Force (RIF)
Depending on the size of your company, HR can have many roles and responsibilities in a RIF. Here are a few of the key roles HR will have.
Responsibility 1: Getting Organized
HR is the person who knows “Who’s Who.” Capitalize on that and organize the team. You will need to build a team to make sure the RIF is executed effectively. Your team should include the top operations leader who has made the decision for RIF, legal counsel, the benefits leader, the IT leader, and finance leader.
Schedule a meeting with this core team of individuals and set the stage. Require the highest level of confidentiality throughout the process, given the sensitivity. Develop a timeline with the team. Some RIFs take months to finalize depending on the circumstances. Make sure to schedule regular meetings to ensure everyone is up-to date on their responsibilities and timelines.
Responsibility 2: Facilitating Decisions on the Job-Related, Objective Criteria for Employees to Be Exited
The employee selection process must be objective, fair and documented in the event it is ever questioned. HR partnered with legal counsel is the guiding compass through this process to ensure everything is airtight.
Once criteria is chosen, it’s extremely important to hold the team and leaders accountable to the selection.
Examples of common criteria chosen when evaluating which employees to be exited include:
- Documented performance
- Years of service
- Critical skills
Responsibility 3: Consolidating Data
It is important to have a master spreadsheet of affected employee data. Recommended data columns in your sheet include the following: employee ID number, first name, last name, preferred name, job title, pay rate, FLSA exemption status, start date, original start date (if a rehire), employee mailing address, preferred phone number, selection criteria, birthdate, and race/ethnicity.
Some of this data must remain confidential even to the business leader. Birthdate, race/ethnicity, address, and phone number should be removed from any reports provided to members of the RIF team, aside from legal counsel.
Responsibility 4: Supporting Affected Employees
Typically HR will be the first point of contact to affected employees. Be prepared to answer questions or set processes in place to refer them to specialists.
Responsibility 5: Tracking Severance (if Applicable)
If severance payouts are going to be extended, tracking of responses is centralized and typically the responsibility of HR.
Responsibility 6: Creating a Script
Develop a script and FAQ with the message deliverer. This script should be concise, sincere and tie the message back to the business case. During message delivery, HR should be ready to step in to redirect the conversation if the message deliverer gets off track during the meeting.
Compliance Requirements for a Reduction in Force (RIF)
Compliance is a key piece to executing a RIF. Here are a few key things to be aware of to remain compliant.
Requirement 1: WARN ACT
The Worker Adjustment and Retraining Notification Act requires companies with more than 100 employees to provide 60-calendar days notice in advance of closure or mass layoffs. Failing to comply with the law could cost the employer up to 60 days of back pay and benefits for each employee.
Requirement 2: Avoid Disparate Impact
Reviewing the data with legal counsel is necessary in order to avoid disparate impact. Disparate impact is when the decision adversely affects one protected group more than another segment of employees, even if it was not intended.
Requirement 3: Data Retention
Make sure that all data around the decision-making process is filed and saved in a confidential folder. During the initial planning phase, a discrete project name should be selected, such as “Project Ocarina,” “Project Windwaker,” etc. After the RIF has been executed, rename the file as the location and year of the RIF so anyone can find it easily if the historical data needs to be assessed.
Requirement 4: Risk Analysis with Legal
Do a risk analysis with your legal counsel. Make sure to come prepared with the spreadsheet of employee data. Also make sure to have a clear understanding of any compliance complaints anyone on the termination list has brought forward to ensure accusations of retaliation don’t come as a surprise.
Requirement 5: Review State and Local Requirements
You can partner with your local unemployment office and they will be able to help you with specific laws and regulations. The unemployment office can provide guidance on state/local notification deadlines and can also provide the affected employees with job placement services free of charge.
How to Conduct a Reduction in Force (RIF)
Conducting a RIF is never easy, but having a solid plan of action can make it a smoother experience for all parties involved. Here are a few major steps in conducting a RIF.
Step 1: Assess Group Size and Meeting Venue
Determine the group size and location. Prepare the room with water and tissues, and ensure there is seating ready. If you have concerns about possible violence, consider hiring security guards to be in the building and/or outside in the parking lot. Be very clear on the role security will play. You can also notify your local police department to make them aware of the upcoming meeting.
Step 2: Address the Affected Employees
Determine the group sizes and message delivery beforehand. Individual meetings are more personal, but after a few meetings, people know what to expect. A group meeting allows for message control. Have the leader address the group and stick to the script developed in the planning meetings. After the message is delivered refer them to individualized resource packets you have put together for them. This packet should include termination letter, employee assistance program (EAP) information, COBRA information, the employee’s last paycheck, and relevant contact information if the employee has questions.
Step 3: Address the Remaining Staff
Effective communication about the RIF with the remaining team is critical. Give the reasons why the RIF happened and if you can without a doubt say no more RIFs are planned, do so. Schedule in-person meetings with those directly affected, such as co-workers, project members, etc. to deliver the news their team member is leaving and address any concerns. Send out a broader communication giving an overview of the business reason, organizational chart changes, and work schedule changes, and provide contact numbers for questions as well as the EAP information.
Step 4: Monitor Atmosphere
Keep a pulse on the morale of the remaining employees. Any concerns that are raised should be dealt with quickly and professionally. Encourage managers to be more visible. It will take time to heal from the RIF. Managers, employees and you will all feel the loss. Take time for yourself after the process is done and remember to use the EAP if needed as well!
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Sarah is a Compensation Advisor with Archer-Daniels-Midland Company supporting Global and Corporate Compensation. Formerly an HR Business Partner for 5 years. She is committed to building diverse teams and developing common processes. When not rocking out her role, she is watching anime, playing Xbox, or out dancing.