What is Layoff? Decoding the Common Term for Staff Redundancy

In the context of a turbulent global economy, the term "layoff" appears increasingly frequently in the media and in daily conversations. In Vietnam, many businesses also face this difficult decision. So,what is layoffand how does it differ from other forms of employment termination? The following article will provide a comprehensive understanding of this concept.

Layoff: Termination of employment contract not due to employee's fault

Layoff, or staff reduction, describes when a business terminates the employment contract with one or more employees, or temporarily suspends their work. This usually stems from objective reasons, unrelated to the employee's performance or personal conduct.

Key characteristics of Layoff

• Objective causes:Layoffs arise from external factors impacting a company's business operations. These factors can include economic recession, organizational restructuring, declining market demand, or the adoption of new technology replacing human labor. For instance, during the COVID-19 pandemic, many hotels and restaurants in Vietnam, such as the Golden Gate chain or Mường Thanh Group, had to implement mass layoffs due to lockdown orders and travel restrictions.
• No personal fault:The important difference between a layoff and other forms of dismissal is that it does not stem from misconduct, violation of regulations, or poor employee performance. Employees who are laid off are often capable and compliant with regulations.
• Can be temporary or permanent:Originally, "layoff" often referred to a temporary cessation of employment with the hope of re-employment when business conditions stabilized. However, currently, the term is generally understood as a permanent termination of employment. Some garment businesses in Binh Duong temporarily laid off thousands of workers in late 2022 due to a lack of orders, but most of them were subsequently unable to return to work.
• Scalability:Layoffs can affect an individual, a small group, or hundreds, even thousands of employees simultaneously, depending on the severity of the difficulties and the business's strategy. For instance, some large technology companies in Vietnam, such as Tiki and Sendo, have implemented large-scale staff reductions, impacting tens of percent of their total workforce.

Layoff and other forms of employment termination

Understanding the difference between a layoff and other forms of employment termination helps both employees and businesses have a clear view of their rights and obligations.

Fired/Dismissed

• Definition:Dismissal is a disciplinary measure applied when an employee seriously violates internal regulations, labor laws, or fails to complete assigned tasks after numerous warnings and opportunities for improvement.
• Cause:Employee misconduct. For example: habitual tardiness, disclosure of trade secrets, theft of company property, or failure to meet sales targets over an extended period.
• Consequences:Workers often do not receive severance pay or other compensation, depending on the severity of the violation and legal regulations.

Forced resignation

• Definition:This term is often used in the public sector, applying to officials, civil servants, and public employees who violate discipline or fail to meet job requirements.
• Cause:Similar to dismissal, but applied within the legal framework for cadres, civil servants, and public employees.
• Consequences:Loss of employment and potential damage to reputation, future job opportunities.

Unilateral termination of labor contract

• Definition:Is a right of both employees and employers in specific cases stipulated by the Vietnamese Labor Code.
• Unilateral termination by the employee:The contract can be terminated with sufficient notice and without cause, or immediately if one is mistreated, not paid, or for other legitimate reasons allowed by law.
• Employer unilaterally:It is permissible to unilaterally terminate a contract when an employee repeatedly fails to fulfill contractual obligations, experiences prolonged illness, due to natural disasters, or for economic reasons necessitating production reduction and job cuts. Layoff falls under this category, when a business unilaterally terminates a contract for economic reasons.

Real-world examples of layoffs in Vietnam

In Vietnam, layoff waves are no longer unfamiliar, especially in recent years as the economy has faced many challenges.

• Tech firms face difficulties:In late 2022 and early 2023, many startups and major tech companies in Vietnam conducted rounds of layoffs. For example, some e-commerce or delivery platforms had to scale down their operations, leading to hundreds of employees losing their jobs. These companies often cited restructuring, cost optimization, or a decrease in investment capital as reasons.
• Manufacturing sector affected by orders:Textile and footwear enterprises in major industrial parks such as Binh Duong and Dong Nai regularly face the risk of layoffs when the export market declines. When orders from the US and Europe decreased by 20-30% in late 2022, many factories were forced to rotate workers or permanently lay off tens of thousands of employees.
• Tourism and service businesses in crisis:During the pandemic, the tourism and service industries were hit hardest. Many large hotels in Hanoi and Ho Chi Minh City, and tour operators like Vietravel and Saigontourist, had to implement layoffs to survive, with the number of employees cut reaching 50-70% of the total workforce at times.

The impact of layoffs and how to cope

What is a layoffis not just a legal concept but also carries profound social significance. For employees, a layoff is a major shock, directly affecting their income, family life, and mental well-being. For businesses, it is a difficult decision that can damage reputation and impact internal culture and the productivity of those who remain.

To minimize negative impacts, businesses often try to support laid-off employees with statutory severance pay, assistance in finding new jobs, or by providing retraining courses. For employees, proactively improving skills, building a network, and preparing emergency financial reserves are important ways to cope.

UnderstandingWhat is a layoffhelp both businesses and employees better prepare when facing fluctuations in the labor market.