In July, Microsoft cut 4,800 jobs. Its chief people officer told employees the eliminated roles weren't being replaced by AI. In the same message, she said AI is changing how work gets done.
Oracle's annual report points to AI as a driver of its workforce reductions.
You can read those statements however you want. Here's what matters. Thousands of employees read them and asked the same question. What aren't they telling us?
Your team asks that question too. And in a small business, you don't get a press release to hide behind. The people who stay will see you at work the next morning.
So let's talk about how to run a layoff the right way.
Survivors Don't Feel Lucky
Plenty of owners assume the people who keep their jobs will feel grateful and work harder. The research points the other way.
Leadership IQ surveyed more than 4,000 workers who stayed through a layoff. Of those, 74% said their own productivity dropped. And 87% said they were less likely to recommend their company as a great place to work.
A 2025 survey from Kahoot showed the same pattern from a different angle. Of the workers who went through a layoff, 61% said their workload went up right away. And 73% said they got no structured training for their new responsibilities.
Keep one thing in mind. Leadership IQ is a leadership training firm and Kahoot sells training software. Both surveys come from companies with something to sell. But the pattern matches what I see with small business clients. The people who stay inherit more work, get less information, and start doing the math on their own future.
Tell People the Real Reason
If the reason is cost, say cost. If it's a slow quarter, say that. If it's AI, say AI.
Employees can handle bad news. They can't handle a story that doesn't add up.
A vague explanation creates a second problem. Employees fill the gap with their own theories, and those theories are usually worse than the truth.
There's a legal reason to stay consistent too. EEOC guidance on severance agreements describes an employee who was told his job ended because of a reorganization. After a younger person was hired to do his old job, he sued. The company then said the real reason was poor performance. The court held that fraud was enough to invalidate his waiver.
Pick the real reason. Stick to it in every conversation, every document, and every email.
Action item: Write the reason in two sentences before you tell anyone. If you can't, you're not ready.
Get the HR Compliance Basics Right
HR compliance is where small businesses get hurt during a layoff. Here are the two federal rules to check first.
The WARN Act. Federal WARN requires employers with 100 or more employees to give at least 60 calendar days of written notice before a plant closing or a mass layoff that affects 50 or more employees at a single site. The Department of Labor also notes that some states have their own laws and points employers to their State Dislocated Worker Unit for details. If you're under 100 employees, check your state before you assume you're clear.
Severance and releases. If you offer severance in exchange for a signed release and any employee is 40 or older, the Older Workers Benefit Protection Act sets minimum rules. The release must be written in plain language and name the Age Discrimination in Employment Act. It must advise the employee in writing to talk to an attorney. It must offer something of value beyond what the employee is already owed. And it must give the employee seven days to revoke after signing.
The time to consider the offer is 21 days for one employee. It's 45 days if you offer the release to a group. The EEOC says a group program generally exists when you offer extra pay for a release to more than one employee. So laying off two people with severance can trigger the 45-day rule. You also have to disclose the job titles and ages of the people selected and not selected in the group you chose from.
One more point. No agreement can stop an employee from filing a charge with the EEOC. Don't put that language in your release.
This is general information and not legal advice. Have an employment attorney review your plan and your release before you act.
Action item: Before you announce anything, call your employment attorney and confirm which laws apply in your state.
Run the Day With Respect
Notify everyone affected on the same day. Rumors move faster than you do. A week of guessing whose name is on the list does more damage than the decision itself.
Train your managers before the day. Give them a script, the facts on severance and benefits, and permission to say "I don't know yet." Nobody should learn their job is gone from a manager who is improvising. That's employee relations at its most basic.
Treat the people leaving with respect. Tell them in private, in person when you can, and put the details in writing. Offer fair severance, clear benefits information, and help with the next job if you can. The people who stay are watching how you treat the people who go.
Action item: Hold a manager prep meeting at least one day before you notify anyone.
Talk to the People Who Stay
Speak to the remaining team within two days. Say what changed, who owns what work now, and what you're going to stop doing. If you add work and take nothing away, you've asked for resignations.
Then re-onboard anyone who took on new duties. Kahoot's survey found only 27% of workers got structured training or orientation for their new responsibilities. That's an easy gap to close.
Meet one on one with every person who remains. Ask what they need, what worries them, and what's unclear. Then follow up on what they tell you.
And in my experience, cut once. Repeated rounds teach everyone that the next one is coming. If you can't commit to a number you can stand behind, you're not done planning.
Action item: Put a one-on-one on the calendar for every remaining employee before the end of the week.
Your Move
Picture the best person on your team. The one you can't afford to lose. Now picture them sitting across from you the day after a layoff.
Could you explain what happened, why it happened, and what happens next? If the answer is no, you have work to do before you announce anything.
A lot of small businesses have nobody to lean on for this. If you're big enough to need HR but not big enough for a full-time HR department, fractional HR and HR outsourcing give you that expertise at the moments that carry the most risk. An HR consultant for small business can help you plan the message, check the compliance, and prep your managers before the day arrives.
Want help with running a layoff in your business?
Schedule a free 30-minute discovery call with Ricky Baez at baezco.com/contact-us.