According to the U.S. Small Business Administration, 99.7% of all the businesses in the U.S. are small businesses, employing less than 500 employees each. While much of the news coverage around layoffs focuses on big companies, there are 28.8 million small businesses in the U.S. that might be tasked with overcoming the challenges brought on by an inevitable reduction in workforce.

The reasons behind a layoff often look much different in the SMB world than across large corporations. Forbes recently reported on the impact that the $15 minimum wage conversation is having across many SMBs—in some cases, in order to pay employees a greater minimum wage, business owners resort to laying off other employees. In other cases, limited financing or a lack of funding forces SMB owners to lay off workers. Fundera reported the results of one NSBA study that found 27% of businesses weren’t able to receive the funding they needed to employ enough people to get the job done.

Despite the disparate factors driving the necessity for a layoff, the needs of employees impacted by layoffs are no different whether they are employed by a small to medium sized business or by an enterprise organization.

The SMB outplacement myth

Many SMB owners have come to believe the common myth that they are not expected to offer employees outplacement or career transition services. They mistakenly believe that outplacement is for their large, enterprise cohorts—but this couldn’t be further from the truth. From a strictly definition aspect, outplacement is, “the provision of assistance to laid-off employees.” There is, in fact, no differentiation between types of employees, or types of organizations offering the service.

For many small companies, inexperience with layoffs and a lack of knowledge of the services available have been a barrier to exploring outplacement as an alternative to simply letting people go without any kind of safety net. While large organizations may be focused on offering outplacement as a way to maintain a well-established employer brand, avoid legal liability issues, and decrease future unemployment taxes, SMB owners have the added concern of taking care of employees who have come to feel more like family.

As we approach small business week at the end of April, we thought we’d take a minute to talk about tough business decisions for the SMB point of view. Whether or not you have an HR department, or just one person taking on the HR role, small and medium business owners need to take a step back to examine possible gaps in their HR strategy that might lead to larger problems later on.

We’ll ask the question, “Are you doing everything in your power to invest in the employee experience, from hiring to career transition?” If you haven’t thought about it before, you might want to learn a bit more about outplacement services and how they can help you make transitions smoother and workforce restructuring less painful for the employee and the company as a whole.

Here are 5 ways a reduction in workforce is bound to impact your SMB, and a few creative suggestions for minimizing the damage:

 

#1: Close-knit community

While large businesses may have thriving company cultures and tightly-knit sub-communities of employees, small businesses often resemble a small town with one group of employees working closely together. In most cases, SMB employees know everyone in the organization, from the CEO to the summer intern. In many cases employees have even met each other’s families; perhaps employees get together on the weekend, or enroll their kids in the same Saturday morning soccer league.

While these types of workforces make for a great workplace culture, the closeness of the employees to each other and to the management makes it more difficult to undergo a layoff – even if that layoff only impacts a small number of people. The loss of colleagues feels more personal to those being laid off and to those who remain because they know each other on a deeper level. Instead of the layoff impacting somebody in another department or a different office location, SMB layoffs often impact the people the employees are accustomed to seeing in person every day.

Of course, any layoff is difficult for the impacted employees and for those who remain at the company – however, the emotional impact is even greater when it happens to a small business. Offering career transition services through a contemporary outplacement provider is vital for SMBs hoping to overcoming the challenges associated with a reduction in force. When impacted employees spend less time in career transition limbo, their friends and peers are more likely to return to productivity and stop worrying about their welfare.

#2: Small, but mighty, HR team

In many SMB team structures, the HR person is trying to do everything. They review compensation, decide which snacks to order for the office, and deal with tough management issues—all in a day’s work. Since these small, but mighty, HR teams become the catch-all for all-things-people, it’s difficult for HR pros in small businesses to take a deep dive into any particular area. As a result, when a layoff does occur, these professionals maybe faced with challenges they’ve never had to address before. Instead of leaving your HR team to make the best with what they have, it’s a good idea to partner with a contemporary outplacement services provider. Besides getting support for your impacted employees, a modern outplacement company will be available to support your HR team, train your managers, and offer best practices for every aspect of the layoff.

Partnering with an outplacement service provider doesn’t add more work for your HR team—it alleviates some of the pressure and challenges they’ll face. Even when services are offered ala carte, established outplacement providers will offer a menu of HR support services to make sure your staff has all the tools they need to implement a successful, and lawful layoff process.

#3: Cost as a barrier

It’s a myth that only large corporations can afford to work with outplacement service providers. Quality outplacement services exist that don’t cost an arm and a leg. However, don’t make the mistake of working with a boutique firm that doesn’t have the experience, or the staff to deliver high ROI on your efforts. While boutique firms may have what seems like a modern solution to outplacement, they are often one-size-fits all approaches that work with some of the organizations and some of the individuals they serve. On the other hand, many of the legacy outplacement providers have outdated approaches that don’t allow for the flexibility of cost and services a SMB may require.

Instead of selecting an outplacement provider that offers a one-size-fits-all approach, find one that will work with your specific needs and within your budget constraints. Through unique solutions from contemporary outplacement providers, SMB employers can feel confident that their employees are getting support from a well-established organization with a modern approach that includes both high touch and high-tech services and matches how jobs are found and landed today. HR teams can choose what they need and purchase only the services they require while ensuring they are doing everything they can to help impacted employees transition smoothly, while keeping surviving employees motivated and engaged.

#4: Legal ramifications

What larger organizations have known for years, small and medium size businesses often learn the hard way – no company is exempt from the legal ramifications of a layoff. The U.S. Department of Labor Employment and Training Administration enacted the Worker Adjustment and Retraining Notification Act (WARN), which protects workers, their families, and their communities by requiring employers to provide notice 60 days in advance of layoffs impacting more than 33% of the workforce.

While large organizations may not have to worry about WARN, except in cases of mass layoffs, SMBs may be faced with WARN for only laying off a small number of people, depending on the overall size of the company. Although WARN requirements can vary state to state, any SMB considering a layoff should be aware of the laws surrounding workforce reductions. Whatever your intent or reason for restructuring your workforce, enter the layoff process with caution, and be sure to find a legal counselor or partner who can guide you through the ins and outs of these pertinent employment laws.

#5: Bigger impact of future business

On paper, a layoff in the SMB environment might look smaller than a mass layoff across a large corporation, if you only compare the number of individuals impacted. Yet, an SMB layoff can have a devastating impact on the future of your business, if not handled properly.

The SMB employer brand is often tainted heavily by a layoff, especially since the company is comprised of a tight-knit community. Because the company is small, people tend to know each other and everyone knows someone who has been laid off. This creates more reason for current and former employees to discuss the layoff—and how your company handled it.

Even beyond the brand, SMBs often have a tough road to recovery following a reduction in workforce because there are simply less people to fill in the gaps. Despite a lessened workforce, the same amount of work still needs to get done. A company’s ability to successfully pivot and keep surviving employees on track will make or break its future moving past the layoff.

Layoffs are inevitable, even for SMBs. Despite popular myths, small and medium sized businesses don’t need to feel helpless if they’re up against a reduction in workforce. Outplacement isn’t just for big corporations—it’s a viable, affordable solution that ensures even the smallest of companies, and all its employees, stay afloat.