A reduction in force (RIF) is when an organization eliminates roles with no plans to rehire any of the terminated employees. It’s a downsizing of the organization, typically in response to an economic downturn, shifting business priorities or reorganization of the company.
RIF vs. Layoff
RIFs and layoffs are often used synonymously to refer to a company’s staff reductions motivated by budget constraints instead of poor performance or behavioral issues. Unlike RIFs, layoffs are sometimes considered temporary, allowing for employees to be rehired in the future.
What Is a RIF?
A RIF, or reduction in force, is the term for when a company terminates some of its employees, decreasing the size of its staff. Companies might undergo a RIF to rightsize the organization when it’s faced with a down economy, loses key clients or needs to compensate for hiring too many workers too quickly.
Employees who lose their job in a RIF are let go due to organizational demands, not poor performance or any other issue within their control. Still, losing a job during a reduction in force can be an incredibly difficult experience and shatter a person’s confidence.
“I think a lot of people [impacted by a RIF] are trying to emotionally recover from the shock and betrayal,” said Jena Dunay, founder at outplacement firm Recruit the Employer, “even if they saw it coming or even if they wanted to leave.”
It’s common for employees who lose their job in a RIF to receive a severance package and outplacement services to help them find a new job.
RIF vs. Layoff: How Are They Different?
Layoffs and RIFs both refer to involuntary terminations that are triggered by financial constraints.
Traditionally, layoffs refer to a temporary staff reduction. Often used in reference to seasonal employment, they are implemented with the understanding that the workers could be hired back when business picks up again.
RIFs, on the other hand, are more of a permanent measure due to a long-term staffing reduction or restructuring of the company.
In everyday usage, though, the terms RIF and layoffs are used interchangeably.
“Layoffs are being used synonymously with RIFs, and they are not referring to bringing people back,” Carly Holm, founder and CEO of fractional HR firm Humani HR, told Built In.
Another difference is that a RIF typically affects a larger number of employees than a layoff. An employer might opt to make a deeper staffing cut with a RIF if they want to avoid additional rounds of layoffs.
David Lewis, CEO of HR consulting firm OperationsInc, told Built In that it’s better to “rip off the Band-Aid” with a well-planned RIF than risk several rounds of layoffs that further damage team morale. “A RIF gives you one event to coalesce around and then move on,” he added.
Alternatives to a RIF
A company might pursue alternative cost-saving measures instead of implementing a reduction in force.
Furloughs
A furlough is an unpaid leave of absence due to budget constraints or a shortage of available work. An employee could see a reduction in their hours, or they could be out of work for a matter of days, weeks or months. Furloughed workers are still employed by the company and entitled to healthcare benefits.
Hiring Freeze
A hiring freeze is when a company stops hiring new employees to save costs. The company does not create any new positions, and it does not replace workers who leave the company. A company might need to backfill key roles to continue business operations, however.
Natural Attrition
Natural attrition refers to employees leaving the company of their own will, typically if they resign or retire. When employees leave the company, companies can cut personnel expenses by either not backfilling the position or by hiring a less-experienced employee at a lower salary.
Pay Cuts
A pay cut is a reduction in employee wages that can shave personnel costs without eliminating positions. It may not be popular with employees, but they may accept a slight reduction if they believe the economic downturn is temporary or due to macroeconomic conditions.
Cuts in Perks and Benefits
Companies can also cut expenses by reducing perks and benefits. Some benefits, like health insurance, are critical to an employee’s livelihood, but there are other benefits, like free lunches, 401K match contributions and employee wellness programs, that could be cut until business improves.
Job Sharing
Job sharing is an arrangement in which two employees split the responsibilities of a full-time position on a part-time basis. This tactic can help companies save money, as it’s typically cheaper to pay two part-time workers than a full-time employee with benefits.
Voluntary Separation
Before undergoing a RIF, a company might want to offer a voluntary separation agreement to employees who might be interested in leaving the company. A severance package might take into consideration an employee’s tenure with the company, unused paid time off (PTO) days and the continuation of health insurance benefits.
What Causes a RIF?
There are several reasons why a company might implement a reduction in force:
- A company loses revenue due to a drop in sales or a loss of key clients.
- A merger or acquisition creates duplicate or overlapping business functions.
- A company closes an office or plant location.
- A company makes a strategic shift or discontinues a product, eliminating the need for the team that worked on that project.
Holm said a RIF is typically a “last-case scenario” that companies take when they have no other options.
“It’s the worst thing any kind of business owner is going to have to do,” Holm added. “No one hires people to let them go. You hire them to help grow your company and be successful.”
Frequently Asked Questions
What is a reduction in force or RIF?
A reduction in force (RIF) is when a company terminates employees to downsize its headcount, often in response to a loss of revenue or a restructuring of the organization. In common usage, the term RIF is interchangeable with a layoff.
What is the difference between a RIF and a layoff?
A RIF results in the permanent termination of employees, whereas a layoff traditionally refers to a more temporary measure. A laid-off employee could be let go during a slow season, for example, and brought back when business picks up. The terms RIF and layoff are often used interchangeably, though, with the understanding that a layoff is a permanent termination.
What causes a RIF?
A RIF is typically caused by financial hardship that is not expected to rebound in the near future. It can also be caused by a merger or acquisition, a plant closure or a shift in business strategy.
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