RIF in business is a term that describes the downsizing of the business workforce. This is not the most pleasant thing to do but there are times when taking this step becomes a necessity.
This post dives deep into this concept by defining the term as well as exploring key areas to help you understand what RIF is all about and how it works in business.
Meaning of RIF in Business – What is RIF in Business
RIF is an acronym for the term reduction in force.
As you can guess from the name, this is a process through which businesses permanently terminate the employment of some members of their workforce.
The reasons for these permanent employment terminations can be anything from budget cuts, financial loss, business strategies, mergers, and so on.
The process involves evaluating the positions that aren’t necessary to meet the business goals and eliminating these positions to reduce the workforce.
Recently, a lot of businesses may have considered and even carried out this process as a result of the aftermath of the COVID-19 pandemic.
This goes to show that some of the time, RIFs are unavoidable.
A lot of companies know that reducing their workforce can have a negative impact.
So, unless it is unavoidable, businesses do not go through this process.
The good news is that, while this issue isn’t always avoidable, businesses can carry it out in a way that won’t spell doom for the company.
And this and more is what you are going to find out in this article.
Reduction in Force vs. Layoff – What is RIF in Business
Layoff and reduction in force are two different terms that people tend to mix up.
So, what is the difference between them?
Well, that lies in their definitions.
A RIF is a permanent elimination of a position in a company.
Whereas, a layoff refers to a temporary, often involuntary employment termination.
This means that when you lay off an employee, you do not currently require that position, or perhaps you cannot afford it for the time being.
The company’s intention during a layoff is to recall the employee(s) after the situation that warranted the layoff is resolved.
Unlike a RIF, this situation is temporary from the start.
During this period, the employee may not carry out duties in the company, and they won’t receive wages.
However, with time, the layoff may become permanent.
If the company realizes that the position the employee fills is no longer necessary, it can make the employment termination permanent.
If this happens, then the layoff would become a RIF.
So, the major difference between both terms is the duration.
A RIF is permanent from the onset.
While a layoff is temporary.
But it may become permanent (a RIF) in some cases.
Reasons for RIFs and Layoffs
While the duration is the main difference between RIFs and layoffs, the reasons behind both processes may also serve as a differentiator.
Reduction in force often happens because of permanent situations in the workplace.
It is often a permanent fix for a recurring issue.
It could be that the company is recovering from a loss or that it wants to limit its services and products.
Budget cuts, mergers, acquisitions, and extreme reorganizations are some other reasons for RIF.
Layoffs on the other hand happen because of temporary situations.
Often reorganization and a decrease in sales are the major reasons for layoffs.
If a company takes on more employees during peak seasons when demand is high, when demand drops, it may have to lay off these employees.
However, when there’s an increase in demand, the company would likely hire these people again.
So, you could see layoffs as a strategic business move.
This is unlike RIFs which are sometimes unavoidable and even mandatory.
However, because layoffs can turn permanent and become RIFs, most people tend to use them interchangeably.
However, if you are addressing your staff on these issues, then you have to be as clear as possible.
If you are letting go of an employee, you have to be clear with the details.
If it is a temporary situation, then let them know, and if it is permanent, also make sure they know so they can move on with their career.
Avoid using these terms interchangeably as this can lead to certain complications down the road.
What is RIF in Business; Challenges & Drawbacks
If you are going to perform an RIF in your company, then you have to do so carefully.
This is because a reduction in force can cause some unwanted effects on your company if you are not careful.
You should be very cautious of the impact the process can have on your business.
You must take your time to ensure you do everything in a way that won’t hurt your brand reputation.
If you are careless during a RIF, the following issue may come up.
Businesses thrive on trust.
For your business to do well, your customers, employees, and other stakeholders in your business need to trust you.
If you do anything to damage this trust, then it can cause significant consequences.
When carrying out a reduction in force, you should know that people would be watching.
They’d be watching to see whether you take your employees’ well-being seriously.
If you do things badly, this could affect your reputation.
Your customers may form an opinion about your brand that would make them not want to patronize you anymore.
This is why compassion must be a key ingredient in your RIF plans.
Make sure your employees and the general public know why you have to do this.
Increase in Turnover Rate
Your attitude during a reduction in force can also affect your turnover rate.
If the remaining employees feel like their job is at stake in your organization, then they would rather leave by themselves.
This is why you need to communicate properly during this process.
Ensure the entire process is reputable and free of bias and other things that would make your employees fear for their jobs.
There are so many legal issues that can come up if you are not careful during a reduction in force.
So, you need to do your best to abide by the laws during this process.
If an employee feels cheated because you failed to do things by the book, they can sue your company.
And this may end up costing you money.
How to Handle a RIF Compassionately and Effectively – What is RIF in Business
Reduction in force is most of the time unavoidable.
Regardless of how hard you try, it is something that may happen at one point or the other in your business.
Telling your employees that their services are no longer needed in your company is a dreadful task.
It can alter their lives in more ways than one.
The least you can do as their employer is to handle the issue as compassionately as possible.
You also want to make sure that the process goes on smoothly and effectively.
There are so many steps that go into planning and effecting a reduction in force.
But one of the most necessary elements that will make all these steps successful is compassion.
Compassion will also help you implement the RIF reputably.
This way, your company won’t have to suffer the backlash that sometimes accompanies a reduction in force.
As a small business owner, chances are the responsibility of terminating employment may be yours.
Even if it is not, you still need to be sure everything is done with compassion.
If you are not handling the RIF yourself, then be sure to make sure your HR team knows that they have to be compassionate.
The following are some of the tips that can help you (or your HR team) handle a RIF compassionately and effectively.
You have to be sensitive when telling your employees that their services are no longer needed in the company.
Your message and even your tone should be as sensitive as possible.
The tone, word choice, and even how the message is delivered will significantly influence how your employees feel about the news.
If you are sensitive, your employees will see that.
They would understand that it is not your intention to let them off their jobs.
However, just because you want to be sensitive does not mean that you should run in circles.
Be straightforward and avoid using too many words to try and make the news less harsh.
Doing this may end up creating the opposite effect.
Be calm and even as you give the news.
Make sure you use easy-to-understand terms and avoid jargon that would make your message less transparent.
Consider Time and Location
Regardless of how many people the reduction is affecting, you need to make sure you tell everyone the news in person.
Telling someone that they can no longer work for you is bad news.
The least you can do is tell them this news in person.
If you decide to break the news to them through an email, video call, or text, then you’d just be coming off as heartless.
And trust us, you do not want to come off this way.
You do not want your employees to leave your company feeling like you did not care or value them.
Another thing you need to consider is the location where you break the news to them.
Yes, you should do it in person, but the location also matters.
Make sure you break the news to them in a place that offers comfort and privacy; like a conference room or office.
The only time it’ll be okay to tell an employee that they have been affected by an RIF via video call is if the employee works remotely.
The employees that the RIF affects may have certain questions and concerns about the process.
You should prepare yourself to address these questions and concerns.
Make sure you have all the details of the RIF so that you can communicate it to them effectively.
Consider Employee Engagement – What is RIF in Business
Choosing the employees that the RIF would affect is not the easiest thing to do.
But you want to consider the engagement level of your employees.
It would be unwise to terminate the employment of your highly engaged employees while leaving the less engaged ones in the company.
There are so many factors you have to consider when determining your employees’ engagement levels.
These factors include promotion rates, performance, productivity, employee Net Promoter Score, and so on.
You should note; however, that in certain cases, you may not be able to save your high-performing employees.
Especially in cases where the position the employee holds is the position that has to go.
You should also be as supportive as possible of those that are affected by the RIF.
Having incentives and other benefits for them is one way to be supportive.
You can also provide professional support that would help them figure out the next step they need to take in their careers.
Talk to the Remaining Employees
The truth is that after a reduction in force, the remaining employees will become scared for their jobs.
They may also develop an opinion about the company that may make them want to leave.
So, you need to step in and help them feel better.
To help things go back to normal after an RIF, you have to make sure your remaining employees understand the need for the RIF.
The best way to do this is through proper communication.
However, you should avoid making promises.
Do not promise them that another RIF won’t happen in the future.
Some situations may arise that may warrant another reduction in force.
RIF-Related Laws – What is RIF in Business
There are several laws relating to the reduction of forces in business.
These laws can be complex and the penalties for not complying with them can be quite harsh.
This is why you need to ensure you comply with the laws during a RIF.
And the only way you can do that is if you know these laws.
To make it easier for you, this section of this article will discuss some common RIF-related laws.
The WARN Act
If you have more than one hundred employees in your company, then you must comply with the WARN Act law during a RIF.
This law states that a company with more than 100 employees must give their employees a 60-day warning notice before a RIF and plant closings.
Some laws provide employees protection against discrimination in the workplace.
These laws prohibit employers from treating their employees differently due to factors like gender, religion, age, race, disability, and so on.
Some companies suffer legal issues during RIFs because of this issue.
This is because they may be seen as discriminating against older employees.
So, as an employer, you must know that you are prohibited from laying off an employee during an RIF just because they’ve gotten to a particular age.
Although there are some exceptions to this prohibition.
Some visa holders’ legal status in the company is tied to their jobs.
If the employee’s employment ends, then they would have to move back to their country.
For this reason, an employer may still have certain obligations to these visa holders.
This means that if you decide to let go of a visa holder during an RIF, then you may be responsible for funding their return to their home country.
How to Avoid Issues During an RIF – What is RIF in Business
The best way to avoid issues during a RIF is to make sure that you comply with every RIF-related law.
However, even when you do so, some issues may still come up.
This is why you also need to be sure that you are doing things with compassion and zero malicious intent.
The following tips should help you in this regard.
You need to be consistent with your reason for the RIF before, during, and after the process.
You also need to make sure that your words match your actions.
If you are carrying out a RIF because the number of workers you have is too much.
Then stick to this.
Do not start hiring new employees shortly after the reduction if this is your reason.
You can anticipate people’s reactions to things you do during the RIF by asking certain questions.
Ask yourself things like “How respectful is this?”, “how would people see this?
“, “is this action fair and right?” and any other question that will help you do the right thing.
Know When You Need a RIF
When a RIF creeps up on a company, chances are they would do things wrongly and end up with lawsuits.
This is why you need to anticipate your RIFs.
Learn to evaluate your company and know when you may need to let go of some employees.
This way, you’d be more prepared for the process.
You would be able to do things right and protect yourself against any lawsuit.
Letting go of employees is not an easy task.
But this may be unavoidable in certain situations.
This is why you need to be careful, compassionate, and effective during any reduction of force in your company.
Also, make sure you comply with all the necessary RIF-related laws.
This is the only way to avoid getting a lawsuit and further endangering your business.