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Laid Off Vs. Terminated: Key Differences [The Ultimate Guide 2022]

It is important to know the distinction between laid off vs terminated as it entails your employment contract. Usually, people treat both terminologies to mean the same thing, but that’s not the case.

This article will help you to better understand the difference between laid off and terminated; what each situation means and its effects on future job prospects.

Additionally, we shall look into the different kinds of layoffs and terminations, as well as what follows after each case.

Let’s get at it:

Laid Off Vs. Terminated

Laid Off Vs. Terminated

The key difference between laid off and terminated is that the former refers to a situation where the employer lets you go for corporate reasons, while the latter means getting fired for reasons to do with poor performance on your part.

Basically, both situations refer to the end of an employer-employee relationship.

What Does Laid Off Mean?

Laid Off Meaning: What Does Laid Off Mean?

When you are laid off from a job, it means the company has decided to do away with your job position.

It’s not that you have suddenly become incompetent, it’s just that the prevailing company policies dictate that your contribution is no longer needed; the development is not within your control.

The employer may have decided to consolidate your work with that of a different employee or is restructuring to completely do away with the position.

Such were the occurrences during the Covid-19 when companies had to downsize so as to remain afloat.

The point is that you get laid off for no action or inaction on your part – it all has to do with your employer.

Types Of Lay Offs

Types Of Lay Offs

To further explain the difference between layoff and termination let’s look at how a layoff may manifest.

Typically, there are several types of layoffs but they all fall under two main categories; voluntary and involuntary terminations.

1. Voluntary Layoffs

The definition of laid off at work according to the Office of Financial Management is “staffing reduction strategies that involve requesting or allowing employees to voluntarily give up employment or benefits.”

This end of employment is brought about by reasons that are outside of your control and is nothing to be ashamed about.

An employee or a group of employees are encouraged to terminate employment for a financial incentive.

Employees get a chance of finding a new job and other life goals on their own terms, with some money that can sustain them for a few months.

2. Involuntary Layoffs

Following the completion of a voluntary layoff option, a company may have to request specific employees to terminate employment. This may be due to previous under-par work performance as decided by a transitional review team.

It simply means that although you are still competent to discharge your duties, going forward, the organization can do without you.

Other Types Of Layoffs

An employee may also be selected for layoff under the following terms:

3a. Temporary Layoff

Your services, duties, or appointments are reduced. This means that you’re laid off, at will, from some of your previous responsibilities, and usually at a lower salary or employee benefits.

3b. Indefinite Layoff

Laying off an employee indefinitely means that although the employer values you, they do not need your services for a protracted duration; usually 4 months or more.

The company can recall you, depending on your availability, or offer a severance package at a later date when it becomes apparent that the position has become redundant.

When Are You Laid-off From A Job?

Terminations and layoffs are common occurrences across all industries. There are many reasons that this happens, but with layoffs, the reasons revolve around staffing changes within a company and cost-cutting.

Among the grounds that you can be given a “laid off” notice include:

1. Job Redundancies

In a situation where you lost your job but your position was not occupied by a new employee, then it means the position has become redundant. The employer finds the employee’s position to no longer contribute meaningfully to the overall staffing.

Usually, the changing needs of the industry are responsible for creating redundancies in entire departments.

For example, when computers became the basic processing units, entire “human computers” departments faced job loss.

2. Cost Cutting

An employee may be laid off from work if a company is not bringing enough money to cover their salary. The situation can also arise when the employer has more debt than their revenue can handle.

Mostly, when you are laid off from your job as part of cost reduction, the company you work for may compensate you in terms of a severance package.

Note: Since a layoff is the involuntary termination of work, a severance package may be a legal right per the terms of employment.

3. Expansion or Shrinking

Whenever a business goes through a major reformation, some staff are bound to be laid off or fired. Such changes include mergers and buyouts.

These are changes that come with new corporate direction and management.

Some roles are integrated or the incoming staff, during a merger, creates duplication of positions which forces a company to fire an employee in the affected position.

Typically, your employer will aid in getting you a new job, a process known as outplacement.

4. Change of Location

If a company relocates, it may become expensive to keep some employees due to the eventual commute or complete move to a new city.

With such major moves, the HR department is expected to communicate well in advance to allow searching for a new job as you await the termination of employment.

4. Outsourcing

You have heard of organizations outsourcing some services overseas to cut costs.

A common offshore staffing role includes call centers. With broad internet connectivity, roles such as virtual assistance are quickly moving overseas.

While the move improves efficiency and cost cutting, it does, however, mean involuntary layoff termination of employees who previously filled the positions.

What Happens When a Company Lays Off You?

When the time comes to part ways for reasons other than their work, employees are first and foremost advised to review their contracts. As a legally binding agreement, it’s the contract that guides you on what you owe.

Basically, a laid-off employee should expect the following:

  • A written notice 2 months (60 days) before the employer lays you off.
  • Whether you are fired or laid off, the employer immediately stops remitting your health insurance payments. However, under certain conditions, you may be eligible for continued coverage under the COBRA program.
  • Consult your attorney for a better understanding of the severance package so as to weed out discriminatory clauses.
  • Your 401k can either be left with your former company or transferred to the new employer; that’s up to you. In case your new employer’s plan is not similar, you can transfer the proceeds into an Individual Retirement Account.
  • A layoff is also a chance to update your curriculum vitae for future job searches.
  • Lastly, you are eligible for unemployment benefits according to the U.S Department of Labor. Note, you may not receive Unemployment Insurance if you quit work for reasons that aren’t related to your job.

What Does Terminated Mean?

What Does Terminated Mean?

Termination in employment means the end of a job. It means that you no longer draw a salary from a company. Termination can be out of your free will or be affected by the company without your input.

Types of Terminations

Termination is a broad term that encompasses separating from a job due to something that is either within or without your control.

For example, “laid off” and “fired” both mean that you have been terminated.

Similarly, termination can include both legal and layoff for illegal reasons.

When Are You Terminated From a Job?

To give a clear understanding of terminated vs laid off vs fired, here is a quick look at the reasons behind terminations:

Firing

Following unbecoming conduct in the workplace or dismal work performance, a company may fire you.

Depending on your employment contract, the hiring manager may or may not try to help you improve or resolve arising issues before the actual termination.

So, is there any difference between fired and terminated?

When you are fired, then you are effectively terminated. However, being terminated does not necessarily mean that you have been fired or can’t continue working as required.

For example, once your contract expires on a temporary job you are terminated but not fired. In this case, you are able to negotiate a new contract and even better terms.

Termination for Cause

Companies fire employees for violating work ethics such as misappropriation of funds and insubordination.

This is known as termination for cause. Serious crimes like theft and sexual harassment can lead to termination followed by legal action against you.

Involuntary Termination

Once a company has exercised a legal right to end your employment for cause or laid you off, your termination is considered involuntary.

Voluntary Termination

When you separate on your own will, such as taking early retirement, then you have voluntarily decided to terminate your involvement with your employer. The same case applies when you resign without undue influence by a company.

Other reasons behind voluntary termination include getting a new or better job, relocation, and education opportunities.

The End of a Contract

Once your contract ends, as per the terms of your temporary employment, then you are considered terminated. If the work is ongoing and your execution is still satisfactory, then you may be allowed to renew the contract.

Some companies may also offer outplacement opportunities as part of your severance.

Constructive Discharge

This is termination undertaken by an employee to safeguard their wellbeing but under duress. Such cases include intolerable workload, hostility from the management, and the like.

For example, if a worker has complained of sexual harassment and they feel that the company isn’t taking any action against the accused, then they may quit.

Typically, former employees who go for constructive discharge can seek legal action and restitution through a wrongful termination attorney.

Note though, for fear of lawsuits, companies usually pay to keep such matters under wraps through the HR and legal affairs departments, and NDAs.

What Happens When a Company Terminates You?

Once you get your termination letter, at the effective date, the company ceases to pay your salary. Depending on the terms of your employment, the employer may also halt your employment benefits.

It’s also important to note that state laws may trump contracts when it comes to how and when you receive your benefits. 

TIP: To ensure you are not short-changed when you are terminated, fired, and laid off, it’s best to get a labor rights lawyer to explain your rights. They can help in unearthing wrongful termination in disguise of lawful firing.

Laid Off vs. Fired Unemployment Benefits

A huge difference between being fired and laid off manifests in the benefits that each situation attracts. To help you better understand, here are the main benefits that come into play after termination.

1. Unemployment

If you are let go for gross misconduct, you can not claim unemployment insurance. On the other hand, once you are laid off, you are entitled to unemployment benefits and other perks.

2. Severance

Being fired means that the company cannot compensate you for lost wages. This is in contrast to a lay off which can get you a lump sum or an installment severance pay.

Difference between Laid off and Terminated: FAQs

Difference between Laid off and Terminated

1. Does Terminate Mean Fired or Quit?

Being terminated by your employer can be due to either being fired or quitting for your own reasons.

A company can terminate you for poor performance, new company direction, theft, and consistent lateness, amongst other causes.

2. Why Being Laid Off Is Good?

Between layoff vs firing, it’s best to get laid off since it’s a testament to the fact that your termination is borne of things, not within your control. You get to claim severance plus benefits, and you are eligible for unemployment. Further, your former employer may help you land on your feet through outplacement.

3. Is Laid Off The Same As Terminated?

When you are laid off, it means that you have been terminated. However, termination covers other reasons such as the end of a contract, firing, constructive discharge, and quitting for a cause.

4. Does Being Terminated Go On Your Record?

What I have learned from the experience of working for different employers, before I decided to go it alone, is that termination is an internal undertaking and does not show on your public records.

That said, you can let a potential employer know the reasons behind your termination if the cause does not affect your job prospects.

5. Are Laid Off Employees Eligible For Severance Pay?

Typically, after your job has been eliminated, you are eligible for severance pay. The financial terms can be as per your initial employment contract or negotiated during the termination of your job.

Your severance package can include several months of pay, insurance benefits, outplacement services, plus other perks.

6. Can An Employee Be Laid Off For Low-Service Operation?

As per the needs of a company, it may be prudent to reduce its services by closing some departments or centers as part of cost reduction measures and operational efficiency. In such cases, some of the workforces may be laid off.

7. Does Termination Affect Future Employment?

Getting fired and hired are commonplace and are to be expected by your new hiring manager. As such, the only way for termination to affect your prospects is if you are unable to explain it amicably and without raising any red flags.

8. What Is Another Word For Laid Off?

On your discharge letter, getting laid off can go by many words including “made redundant”, “disengaged”, “redundant”, “on layoff”, and “discontinued”.

9. What To Say Instead Of I Got Fired?

There is no right alternative to saying “I got fired”, it all has to do with how you explain why you parted ways with your previous employer.

This thread outlines some perfect answers aiming to outline your worth despite the termination.

For example, you can say that “we parted ways before I could resign due to the unavailability of resources/support to discharge my duties”.

10. What’s The Difference Between Layoff and Fired?

The clear distinction between fired vs laid off is that a company fires you when they deem you to be at fault, while they lay you off when they can no longer give you more work or continue covering your salary.

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