What Are Good Reasons to Lay Off an Employee?

Layoffs are sometimes a necessary, but tough part of business. Companies conduct layoffs for numerous reasons and even when justified, they negatively impact employee morale. If you must conduct layoffs, rely on valid reasons to avoid legal challenges. According to the New York Times, the number of laid-off employees filing a claim with the federal government ahead of a discrimination lawsuit rose 15 percent in 2008 and lawyers expected the trend to continue. An example of such a lawsuit includes former Lehman Brother's employees, who filed suit because they were not given the required 60-day severance before the company disbanded.

Drastic Slowdown In Business

According to the Bureau of Labor Statistics, 37 percent of employer-employee separations in the third quarter of 2010 was due to decreases in business demand. A slowdown in business means less income generation, which translates to a need to cut expenses. Payroll is one of the larger company expenses, so cutting jobs is the best way to begin saving money fast Company Merger

Mergers often result in layoffs to avoid duplication between the two companies. Employees may get advance notice of this type of separation since the writing is generally on the wall weeks -- or months, even -- before the actual merger takes place. Moreover, when new management comes in, it is a well known business practice to bring an existing team along. Inefficient Staffing

As a company grows, it is challenging to maintain each person's job duties, resulting in too many people doing small parts of one larger position. The end result might be lay offs to create a more efficient workplace. When you have several people -- and salaries -- for one job, your company saves money in the end by investing in one or two people -- and corresponding salaries.

New Direction

Companies routinely change direction, which sometimes necessitates new skill sets. You may need to lay off employees with skills that are not transferable. Avoid bad publicity and potential legal challenges with attempts to re-train employees. However, if you don't have the time, money or general resources to do so, you may find that you need to let go of a certain portion of the employee pool.