Tuesday, December 2, 2014

A great question: why do holiday layoffs exist?

A respected reader writes in to ask, regarding the GSK announcement tomorrow:
"Why does a company opt to let people know they are losing their jobs three weeks before Christmas?" 
I would actually go so far as to propose that, in the United States, that large-enough companies declare some sort of truce during the holidays. If I were a CEO, I would choose not to hold any reductions in force between say, Thanksgiving and New Year's. I realize that would basically cut out a month in a half where there couldn't be any layoffs, but you've got 10.5 other months to do it.

This is why I won't ever be a CEO of a major corporation, I'm guessing (among other reasons...)

20 comments:

  1. I sacked my entire staff just this morning and replaced them with unpaid. journalism major interns.

    ReplyDelete
    Replies
    1. That it wasn't already being run by unpaid journalism interns is a sign of your n00b status.

      Delete
    2. I'm surprised you didn't just replace them all with journalism robots!

      http://www.theguardian.com/media/shortcuts/2014/mar/16/could-robots-be-journalist-of-future

      Delete
  2. I'm not so sure. With a family to provide for, I think I would rather know before Christmas travel/expenses if I were going to be out of work shortly. It puts a damper on the season but may make some sense from a financial-planning stand-point.

    ReplyDelete
    Replies
    1. I found out just after Christmas once. I told my boss I would have liked to know before so I could have saved up the vacation for pay out at end.... My lab mate took his Christmas presents back one January after finding out layoffs were coming.............

      Delete
  3. It would put a big damper on the holidays but it would be better to know I was going to get laid off than spending a bunch of money I wasn't going to have on gifts.I think it probably would make me more unhappy than I otherwise would have been getting laid off at another time, but it's always going to make people really unhappy.

    Is there some financial timing to end-of-the-year layoffs (to impress stockholders, to move costs off the balance sheet for next year, for example)? I assume there is (why it keeps happening) but I don't know.

    ReplyDelete
  4. I'm surprised it hasn't become more of a trend. Kind of like rebalancing your stock portfolio at the end of the year. You get rid of some dogs and reinvest in some that you think will do well. If the dogs happen to be RTP and the reinvestment so the next Sirigen then that is just business.

    (please don't take the above as my actual opinion though)

    ReplyDelete
  5. I think it has to do with end of year fiscal earnings reporting, or predicted earnings growth for the next year.

    ReplyDelete
    Replies
    1. I agree the last two comment as basic appeasement of Wall St in propping up stock prices probably has much to do with year end announcements. Unfortunately in many cases the general cuts announcement may come then individuals have to wait longer to hear their fate as even if a whole site is closed some people may have potential to transfer and all the uncertainty gets dragged out

      Delete
  6. I'd rather get fired early in December than January 3rd. For one reason, it allows for scaling back holiday spending and budgeting for a few months off work. And all the family gatherings allow you to take your mind off the mad scramble to reapply elsewhere.

    ReplyDelete
  7. Execs got to get their bonuses.

    ReplyDelete
  8. Wall Streeters loves layoff during the christmas season! And, others are just ready to play along!

    ReplyDelete
  9. Our family found out on Jan 3, 2009....with no severance at all to help us through the worst part of the recession. What an awful feeling to know that you bought presents when you should have saved. It might be why I still think 10x before buying something at the holidays.

    ReplyDelete
  10. Agree with some of the commentators that being told before the holiday season at least saves you from the regret of having bought that big screen TV/gone on that holiday trip. Plus you actually get to spend some reflective time with your family since presumably your spouse/parents/kids are probably going to take a few days off too. I can especially empathize with this since I was told I was laid off right after Memorial Day weekend, which made me regret buying those (relatively) fancy polo shirts and shoes.

    ReplyDelete
  11. Are there tax reasons for laying people off around this time? Do they get to write off severance pay and the like on their taxes?

    ReplyDelete
  12. Someone who gets laid off has tax reasons to want a package at the start of a calendar year. If the severance package is large most of it will get chewed away by alternative minimum tax. If they get it at the start of the year in which they are unemployed, Uncle Sam gets less of the severance....

    Of course severance packages keep shrinking though...

    ReplyDelete
    Replies
    1. Isn't that what Lorena Bobbitt said?

      Delete
  13. Corporate tax reasons would be in meeting or exceeding (or not missing by more) the estimates public companies give to their stockholders. Once an estimate is given, the price of the stock adjusts quickly to that estimate. Thus in order to make stock go up you must exceed the estimate. However if a company consistently underestimates their financials, Wall Street will eventually price that into the stock as well. So then it becomes a matter of did the company exceed the expected amount it is expected to exceed its goals.

    Large payments (such as severance packages) would decrease the profits of the company for the calendar year, but do not make that much difference in the day to day stuff. Less profits are less tax. It is like postponing taxes for a year if you can lay someone off on Dec 31 versus Jan 1. Companies report earnings and earnings after taxes.

    ReplyDelete
  14. Because MBA's are, by and large, evil fucks.

    ReplyDelete
  15. its cmas eve and my boyfriends entire company, a contractor for cox cable got laid off this morning. its abysmally depressing after all the shopping is done and we just got into a new apartment two days before thanksgiving so bills with deposits are due, and cmas is ruined, and i am terrified and this is not right.

    ReplyDelete