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Handling Workforce Reductions With Mental Health in Mind

Over half of CEOs in America say workforce reductions may be coming in the next six months. Although layoffs are a topic most people would prefer to avoid, it’s critical to know how to do them with employees’ mental health and well-being in mind.

Everyone is impacted by workforce reductions, not just those who are laid off. Managers may feel guilt, stress, and fatigue over having to let go of their staff. Remaining employees may experience sadness around losing their friends and colleagues, stress from increased workloads, and fear of what the future holds. Left unchecked, this can lead to:

“We often think about caring for employee mental health at the individual level. However, when it comes to layoffs, it’s critical to approach supporting employee mental health for employees who remain through strategic organizational planning that helps to reduce employee anxiety and give employees time to process and adjust to the big change,” said Keren Wasserman, an organizational development program manager on the workforce transformation team at Lyra Health.

The first step in making layoffs a less stressful experience is communication, followed by organizational strategic planning to redefine role responsibilities, priorities, and workloads. Ultimately, good planning will pay off with better morale, retention, and work culture.

Build a foundation of clear communication

Not providing adequate communication, especially when a reduction in workforce is imminent, can increase stress and anxiety, and eventually lead to distrust among workers. Layoffs are stressful, but clear communication can make it easier for both managers and employees to navigate these difficult situations. By prioritizing clarity and transparency throughout every step of the process, employees will have a better understanding of what to expect. This supports their mental health and well-being by reducing anxiety about the unknown. Clear communication is a critical first step.

The next step is organizational strategic planning to redefine role responsibilities, priorities, and workloads. This planning should support employee mental health, morale, and ultimately retention.

Transparency should be prioritized for departing employees, but it’s equally important for impacted employees who will remain after the workforce reduction. While stressful, this transition could also be an opportunity to make trust the foundation of all practices and policies, and give remaining employees a chance to do work they love within the organization.

Create a workforce reduction plan

A lack of concrete information can exacerbate anxiety and stress, which could ultimately turn into burnout and other issues. According to a Harvard Business Review study, following a workforce reduction, organizations may experience a:

  • 20 percent decrease in job performance
  • 41 percent drop in job satisfaction
  • 36 percent decrease in commitment to the company

To minimize this, carefully and intentionally craft a communications plan ahead of layoffs. Remember that this plan isn’t just for letting people go, but also for letting the remaining employees know they still have their jobs—and helping them through the changes taking place.

It’s unrealistic to assume that the remaining employees will return to work as normal right away. As part of your plan, consider giving them some dedicated time to process and ask questions that may be weighing on them. Share regular updates with your workforce across multiple channels and make sure messages are highly visible and reinforced. This can be done through emails, newsletters, all-hands meetings, or videos from leadership.

“After layoffs are announced, give employees permission to take time to process the news and allow the dust to settle. Help employees understand which tasks continue to be business-critical versus which tasks can be postponed for a few days. Encourage employees to take time for themselves where possible in their schedule and then give those individuals the opportunity to attend question-and-answer sessions regarding the layoffs in the days that follow,” said Wasserman.

Provide reasons for the workforce reduction

It can be helpful for employees to understand how the workforce reduction plays into the organization’s business case, so try to be as transparent as possible. Explain why the reductions in workforce were important for the health of the organization at large as well as any other measures that were taken before the layoffs. If the CEO took a pay cut or costs were cut elsewhere, make sure to communicate that. This vulnerability can create reverse empathy for the organization and leaders, ultimately building back trust that will help carry the organization forward.

Tips for executing your workforce reduction plan

Once you have a solid plan in place and have communicated clearly with everyone involved, it’s time to back up your words with action. By providing both departing and remaining employees with resources and a vision for the future, you can ease tensions.

#1 Help departing employees land on their feet

Workforce reductions are most difficult for the departing employees, but there are steps to help them navigate the transition. Not only is it the right thing to do, but it can also help make conversations less stressful for everyone. When informing them of the layoff, start with clear communication around topics like severance, retirement plans, and health insurance options including COBRA. This will help laid-off employees prepare for the future and navigate the difficult conversations they’ll be having with their families.

You should also consider offering outplacement services like resume reviews, mock interviews, and networking opportunities. Providing these additional resources demonstrates compassion and can generate goodwill with both departing and remaining employees.

Even with careful planning, tensions can still run high during workforce reduction meetings. As a leader, you can practice empathy in these conversations through the following steps:

  • Focus on what you know about this person and how they may be individually stressed by the layoff. Do they have a family? Are they on a single income? Express that you understand how this will impact them personally.
  • Assure them that they’re being laid off through no fault of their own. Offer resources and ask open-ended questions to show that you’re listening and care about their well-being.
  • If they share feedback, ask questions, or demonstrate frustration, reflect back by summarizing what you heard and asking if it’s accurate. This shows that you’re invested in understanding their point of view and can empathize.
  • If you get frustrated with the person, keep in mind that their reaction is likely due to the stressful nature of layoffs and has nothing to do with you. This can prevent you from taking the situation personally when it likely has more to do with factors unrelated to you, such as finances or feelings of rejection.

#2 Give remaining employees time to process

After a workforce reduction, remaining employees will likely be concerned about increased workloads. They may need to go back to the drawing board and re-strategize work distribution and how goals need to change given the new balance of employees.

This will take some time, so set expectations up front. For example, you can communicate that the next month will be solely, or largely, dedicated to reprioritization, goal-setting, and strategic planning under these new parameters.

Remember, the remaining employees most likely won’t be able to just go back to work right after a layoff and be as productive as they were before. Consider offering a mental health day or some additional breaks. If that’s not something you can offer company-wide, employees should feel safe to ask for it. Take concrete steps to create an environment that fosters psychological safety so that employees can ask for what they need without fear they’ll be viewed negatively.

#3 Address financial stress with future planning

For remaining employees, layoffs may naturally bring up fears around their own finances, job security, and livelihood. In Lyra’s 2023 State of Workforce Mental Health report, financial stress took the place of COVID-19 as the top factor impacting employees’ mental health, as cited by 48 percent of workers. In addition, of those considering changing jobs in the next year, the top reason cited was low compensation.

You can address these concerns by helping remaining employees imagine their future within the organization. Make time to talk with them about their career and personal development plans. Recognize their talents and share your vision for where they’ll be in six months, one year, and five years. This is a great way to signal to employees that they’re valued and important to the organization as a whole, which will in turn create a sense of safety. It also helps clear any lingering doubts about the organization’s overall health.

Learn more tips for navigating layoffs with foresight and empathy in our Guide to Handling Workforce Reductions With Mental Health in Mind.

Taking care of yourself during workforce reductions

If you’re the one making decisions about workforce reductions or having to execute layoffs, it’s important to pay attention to your mental health. Making decisions that you know will have a significant impact on a person’s life and the lives of their loved ones is daunting. Some ways to take care of yourself during this time:

  • Workforce reductions happen for a reason. Remind yourself that this is about sustaining a business, not a person’s inherent value. When you have this mindset yourself, you’ll be better able to interact with the employees being laid off in a way that reinforces that this action is not indicative of their value as a human being.
  • Use mindfulness to keep yourself in the moment. Staying grounded in the present can help you stop ruminating about workforce reduction conversations before they happen and the aftereffects of the layoffs.
  • Keep up with self-care measures that will help you stay physically and emotionally healthy. These include things like getting enough sleep, eating nutritious meals, exercising, and doing activities you enjoy.

Plan for the individual and the organization will follow

Employee mental health and the health of an organization are inherently interconnected. So by focusing on personalized care for mental health, you’re also focusing on your organization’s health at large. This is especially important to remember when it comes to big changes like a reduction in workforce. Plan for the individual, prioritize their well-being and mental health, and you’ll be on your way toward a successful transition.

Lyra can help support you and your team through layoffs or other big transitions.

Schedule a free consultation
About the author
Keren Wasserman
Organizational Development Program Manager

Keren is the organizational development program manager on the workforce transformation team at Lyra Health. Keren has a master's degree in social work from the University of Chicago and has worked as a management consultant focused on large-scale change management implementations. She lives in Seattle where she spends her free time hiking, soaking up the PNW's most glorious mountain views.

By Keren Wasserman
Organizational Development Program Manager
22 of March 2023 - 8 min read
Mental health at work
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