The Impact Of Layoffs: How Surviving Employees Handle The Experience

When Salesforce Senior Brand Manager and Tableau developer Ashley Neville took to LinkedIn to announce she had been laid off, she received an outpouring of support. Many colleagues expressed their shock and sadness; others questioned Salesforce leadership's decision-making. Over a 15-year career, Ashley’s colleagues had watched her speak at numerous industry conferences, had spent time with her at company get-togethers, and one person was even inspired to start his own Tableau career after randomly chatting with her on a flight. It’s clear that Ashley will be remembered fondly and will leave a huge hole in the organization.

Unfortunately, layoffs have become part and parcel of the working world, dominating the headlines since the pandemic. In the tech industry alone, Twitter slashed 50% of its workforce, while Amazon, Google, Meta, and Microsoft each said goodbye to five figures worth of staff. The overarching theme is that no employee is safe, and everyone is replaceable given the right (or wrong) circumstances.

To learn more about how layoff turnover impacts organizations, Nectar surveyed 1,000 full-time US employees across a wide range of industries. Of the employees we surveyed, 32% work at companies that had experienced layoffs within the last three months (38% are between the ages of 25 and 34, 35% have university degrees, and 22% work at companies with 501-1,000 employees.)

This guide explores the experiences of those who survive layoffs—those who continue to work with fewer teammates and the upheaval and uncertainty of what comes next. We offer the latest fresh data and expert insights from companies like Toggl on pulling your people through these difficult periods.

How Do Layoffs Impact Surviving Team Members?

While employee attrition is part of the working world, it cuts deep when we see fellow team members exit via a layoff. Employees will feel a mix of physical and emotional responses that impact their feelings about their roles and careers. Some common reactions include:

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Lost Trust In Leadership

As decision-makers, leaders frequently get the blame when layoffs happen. After all, they’re the people who first decide to make personnel cuts, then select who stays and who goes. Survivors may lose trust in their leaders, resulting in feelings of betrayal and resentment. And, of course, employees will naturally have concerns about the company's financial stability in the hands of their current leadership. 

Emily Trevino, Co-Founder and Managing Partner of Wise Insurance, shared her experience with us:

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“During a company restructuring I was involved in, layoffs led to a noticeable shift in the team dynamic. Trust in leadership was significantly impacted, as employees questioned the decisions being made and the future direction of the company. It’s crucial for leaders to communicate openly and transparently during times of layoffs, providing support for those affected and reassurance for those remaining.”

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Survivor's Guilt

Relief may be the first emotion that layoff survivors experience. They feel grateful that their name wasn’t pulled from the hat this time, that they can still afford their mortgage, and can continue to provide for their families for the time being. But it doesn’t take long before these feelings are replaced with intense guilt about the people they were chosen ahead of. Sometimes, remaining employees also experience anger too. 

Sam M., CEO of gaming platform Firestarters, weighs in on these common emotions:

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"Survivor's guilt is not a sign of weakness or selfishness. It is a sign that you care about others and that you have empathy. However, if left unchecked, survivor's guilt can take a toll on your mental health and well-being. It can affect your self-esteem, your motivation, your productivity, and your relationships."

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Anxiety About Job Security

If leaders find reasons to eliminate hard-working, talented colleagues from the company, it's only natural that the remaining staff will feel insecure about their own roles.

“Layoffs are hard, and it's inevitable for the team to feel tense, fearful for their jobs, and sympathetic to their laid-off colleagues,” says Jamie Frew, CEO of Carepatron. 

Nectar’s research found that 65% of employees working for companies with recent layoffs now worry about job security, compared to 24% of employees whose company hadn’t gone through the redundancy process. That’s a difference of more than 4 in 10 people with increased anxiety.

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Our research also found the following five industries were more impacted by anxiety:

• Finance and insurance (9.5%)
• Information (9%)
• Manufacturing (8.7%)
• Construction (8.2%)
• Health care and social assistance (7.9%)

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When people worry about the prospect of losing their salaries, some will start to cut back on expenses outside of work. Zety’s Financial Habits and Health Survey correlates with our job security research, highlighting how people are adjusting their finances due to their employment concerns:

• 60% of people are trying to spend less because they're worried about layoffs
• 53% have reduced their spending in line with concerns about the cooling job market
• 42% say their financial situation is less stable today than last year

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Drop In Employee Morale

It's hard to summon the enthusiasm to love and perform in your job when your teammates are no longer there, and you may join them soon. Employee morale is another common casualty of layoffs, which may include the following signs:

• Increased absenteeism 
• Less collaborative teamwork and communication
• Lower productivity and motivation levels

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When we surveyed 1,000 full-time employees, our research revealed that: 

• 58% of employees working for companies with recent layoffs experience the Sunday Scaries—the anxiety and stress that descends on Sunday afternoon or evening when the reality of the work week ahead sets in. Only 31% of employees get this feeling when working at companies that haven’t seen layoffs recently. 
• 61% of people wouldn't stay at work if they didn't need the money.

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Employee Burnout

Cutting a company's wage bill back rarely reduces the workloads of the remaining employees. Typically, surviving team members face the stress of picking up the slack on projects and operations, often without 100% of the knowledge and skills they had with a fully-stocked team. The result? Burnout. Feelings of mental, physical, and emotional exhaustion manifest when employees are overworked and increasingly detached from their work.

When Nectar examined burnout levels at companies that had recently been restructured, 60% of employees agreed that they were currently in the throes of burnout, compared to 32% of people working for companies without layoffs in the past three months.

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Post-Layoff Departures

What's the natural response when a ship starts to sink? Some will wait for it to float again (with mixed results), while others will jump to save themselves. That's exactly what happens when redundancies ripple through a company. The remaining staff members may still show up to work every day, but many will quietly contemplate their next career move beyond the four walls of your organization.

Nectar’s research found a clear connection between job seeking and layoffs. 63% of employees who had recently witnessed layoffs in their own companies plan to look for new work in the next three months. When layoffs hadn’t recently occurred, only 38% of employees were looking.

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The good news for workers is that 68% are confident they could quickly find a new job in today's market. Nectar's research further revealed the following groups of people who were optimistic about securing work:  

• 73% of men and 62% of women
• 74% of employees aged 35-44
• 82% of employees with postgraduate degrees

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However, for companies, increasing numbers of departing team members can lower employee morale further and drive up recruitment costs if you need to keep their positions filled.

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Increased Self-Employment

Both departing and surviving employees know that securing a new position with a different employer doesn't offer protection from layoffs. In fact, it could be even riskier to take up a new role with an employer due to the "last in, first out" rule of redundancy selection.

So, it’s no surprise that some employees give up on permanent employment altogether, preferring the route of self-employment instead. Business coach Stacy Corneau explains why she believes freelancing is a safer option:

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“Freelancing is job security. Multiple clients means multiple revenue streams. Even if one disappears, you can still pay rent—it's not an all or nothing scenario like 9-5 jobs. And you can double your income within 1-3 months when you use a system for business development. The cost of living is increasing. Layoffs are happening more often. And job hunts are taking months longer than they ever have.

So, why not build something you're in financial control of now (when things are going smoothly for you) rather than starting in 6 months (when a job loss, financial emergency, or burn out hits you)?”

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Statista research shows the phenomenal growth of people joining the freelance industry, which is projected to hit 90.1 million by 2028. Similarly, a record-breaking 5.5 million new business applications were filed in 2023, proving that entrepreneurship is booming in the US.

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Working Multiple Jobs

While many of your surviving employees will look to swap their current role with an alternative employment offer or self-employment option, others may become "overemployed," taking on an additional full-time role or selecting to work part-time.

Business Insider reports that in early 2020, network engineer Joseph accepted a new remote role in IT with a higher salary than his job at the time. Rather than quit one job to start the next, he decided to see if he could work both roles for a while without either of his bosses realizing. Six months later, one of his jobs was in jeopardy due to an upcoming restructuring, so Joseph began to look for another role. Surviving the layoffs, he accepted a third remote role and juggled all three positions to earn $344k in 2023.

While overemployment doesn't violate federal or state laws, it could significantly impact an employee's productivity the more tired, overworked, and overwhelmed they become. Additionally, Joseph advises overworkers to be "good, not great" at their job, to avoid becoming too overloaded or promoted into a more demanding role—none of which is beneficial for an organization in recovery.

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Decreased Productivity

With increased anxiety, guilt, frustration with leadership, and sadness about departing team members, it's understandable that your employees won't feel motivated to put 100% into their work. A survey by leadership training and research company Leadership IQ found that: 

• 74% of employees who kept their jobs say their productivity declined following corporate layoffs
• 64% believe their colleagues' productivity has also declined 
• 77% of surviving workers see more errors and mistakes made

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We spoke to CEO and Founder Alari Aho, who described the experience of layoffs impacting productivity at leading SaaS company Toggl Inc.: 

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“Dealing with layoffs is one of the toughest challenges any leader can face. It's not just about numbers and strategies; it's deeply personal and impacts everyone involved, from those leaving to those staying.

Layoffs can send shockwaves through a team. It's like watching a part of a family leave—not easy. The uncertainty and sadness can dampen the spirits of the remaining team members, making them question their own security and the company's future. We've seen productivity dips and a general sense of unease brew in the aftermath."

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10 Ways Leaders Can Support Their Remaining Workers

Companies can and do bounce back from layoffs by committing to their staff and finding ways to reenergize their disheartened employees. Here are ten steps they can take:

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1. Hold Stay Interviews

Stay interviews are structured conversations between employees and their managers, providing a safe space for open dialogue. Employees can describe their concerns, challenges, and professional goals, while managers use the opportunity to persuade their best workers to stay, providing them with concrete information about the future of the company and their role in it. 

Follow these steps to hold an effective stay interview:

• Create a structured list of interview questions to ensure consistency 
• Be authentic and transparent with your answers 
• Listen carefully to employee responses and take notes for future reference 
• Summarize the key points discussed at the end of the interview and follow up on any agreed-upon action items 
• Analyze your data across multiple interviews to identify any trending themes or concerns

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2. Offer Employee Support Services

Your employees have been through the wringer watching their team members depart and wondering who will be next. Providing support such as employee counseling or career coaching is an important first step in rebuilding their confidence and managing their current stress and anxiety levels. People 2U’s CEO Pat Schirripa describes:

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“As managers, we are aware of the significant impact that layoffs can have on team morale. During these changes, we keep a careful eye on our team members' mental health, watching for signs of stress or disengagement. We use a number of strategies to assist our remaining team members by putting their health first and creating a nurturing atmosphere."

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Here are some of the strategies that Schirripa shares:

• We promote open communication by creating a secure environment for individuals to share their concerns and emotions
• We provide extra support and resources, such as instruction on coping mechanisms and resilience or counseling services
• We promote team-building exercises and rewards to keep everyone united and to raise morale.

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3. Prioritize Open And Honest Communication

Layoffs can feel abrupt and shocking to everyone involved. In the aftermath, a lack of communication about what happens next can breed rumors and discontent. In a recent Nectar survey on employee engagement, a whopping 55% of employees shared that they didn't think their company was great at communication, underscoring the importance of prioritizing communication after a layoff. Toggl Inc. CEO and founder Alari Aho believes leaders must communicate transparently to maintain employees' trust and morale. He shared with us:

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“Just once, we have faced the situation of layoffs due to financial crises in the starting years of Toggl, so let me share how we tackled the tough times while keeping our team's morale and spirit intact. Open and honest communication is the key. We held meetings to discuss the changes, the reasons behind them, and what it means for the future. It's about being transparent, answering questions, and addressing concerns head-on.”

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4. Commit To Training And Development

Providing learning opportunities is the top employee retention strategy for 90% of organizations concerned about hanging onto their best workers, according to LinkedIn's Workplace Learning Report. Employees who can visualize their future at the company and believe that their leaders are invested in their development are more likely to remain committed to their roles. If you've lost strength and depth from your talent pool, it's also vital to continuously invest in succession planning to provide a pipeline of future leaders.

In terms of immediate wins, Michael Sensano, a Sales Manager of Apple Truck and Trailer, describes the various ways that L&D programs boosted the team's energy and morale following layoffs:

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“After tough decisions were made, we redirected our energies toward upskilling the team. We held additional training in areas such as customer relationship management and the latest truck and trailer technologies. This enhanced their skill sets and instilled a sense of value and optimism toward their future in the company.

We also provided a supportive post-layoff work environment by setting up a mentorship program. Pairing experienced team members with newer ones facilitated knowledge sharing and built a strong sense of community within the team."

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5. Rebuild Team Cohesion

Workplace connections are a huge part of your employees’ work experience. Nectar’s recent research revealed that:

• 76.13% of employees have a close friend at work 
• 69.5% of employees would be happier if they had deeper connections with work colleagues 
• 77.63% consider workplace connections important or very important in achieving a great company culture 

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These relationships aren’t limited to people mingling with their close team members. 85.38% of the employees we surveyed state they talk with someone outside their department daily or weekly. So, when an organization experiences a wave of layoffs from any company area, this will impact the dynamics of everyone left behind.

You might lose your peacemakers, your cheerleaders, your entertainers, and you have to make up for that by creating a space where people feel comfortable having open conversations, breaking the ice and rebuilding relationships with their colleagues

Paw Vej, Chief Operating Officer of Financer.com, provided us with his experience and tips on rebuilding team cohesion:

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“Once the immediate effects of the layoffs have settled, we often find ourselves with a smaller team or a group of employees who haven't previously worked together. It takes time for this new team to learn to collaborate effectively and compensate for the skills lost due to layoffs.

We've been fostering this process through team-building exercises and activities. These range from team lunches and social gatherings to formal team-building training courses. We recognize that the layoffs might have impacted individuals who were key to team morale and cohesion, and we try to address this gap."

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6. Create Fresh Contracts

Understandably, some employees won’t be able to believe they have a future at the company or that their employer can offer them anything tangible. But being willing to draw up new agreements in black and white could be enough to convince them, as explained by Rob Reeves, CEO and President of Redfish Technology: 

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“They're understandably nervous that they will be next, and communication without proof isn't enough to assuage them. What I recommend in these scenarios is fresh contracts. If you are confident in keeping the rest of the team intact, this is a great moment to review severance packages. Don't be afraid to talk about budgetary issues or outline how these cutbacks will help keep the company afloat and thriving.”

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Nectar Tip: Always seek professional legal counsel before drawing up new employment contracts.

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7. Encourage Employees To Set Boundaries

Managers can alleviate the risk of employee burnout by encouraging work-life balance. This is especially important in times of transition when employees might feel more pressure to prove themselves and fill the gap left by their colleagues. Some ways to set clear boundaries between work and home include:

• Implementing comfort breaks between meetings so no one is stuck in back-to-back calls 
• Establishing expectations about sending or responding to emails and direct messages
• Requiring employees to use their entire paid leave allowance each year 
• Promoting the use of 'Do Not Disturb' functions on communication tools so they can work without disturbance when they're in flow

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8. Clarify Roles And Responsibilities

A change in numbers can have remaining employees scratching their heads about who does what in the new workplace lineup. Clarify the following:

• The responsibilities associated with each role
• Any chain of command changes 
• Any new roles that have emerged due to a restructure 

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Paw Vej advises:

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“Post-layoff, it's common to experience not just low morale but also some disorganization as roles and responsibilities become unclear. In my experience, it usually takes at least six months for the team to regain its motivation and sense of normalcy. As a standard practice, conducting a skills-mapping exercise is beneficial. If it hasn't been done recently, or at all, it's advisable to undertake this to identify the skills your team needs post-layoff.”

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9. Measure Employee Sentiment

Employee sentiment is likely to be low in the immediate aftermath of a round of layoffs. But as you design new strategies to support your employees and promote workplace productivity, it's important to track how well they’re working and make adjustments where necessary. Tracy Davis, Founder & CEO, TRAX Analytics, LLC. suggests the following to monitor sentiment:

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“We made it a point to measure the morale and engagement of our team through regular feedback loops. This involved anonymous surveys and one-on-one meetings to gauge how team members felt and what additional support they needed. Leveraging technology, we were able to gather real-time insights into our team's well-being and adjust our strategies accordingly.”

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10. Boost Morale With Employee Recognition

Turn the tide on waning morale by showing your remaining employees you genuinely recognize and appreciate their hard work. A whopping 83.6% of employees report that recognition affects their motivation to succeed at work, according to Nectar’s recent recognition study. 

Recognition doesn’t need to be a huge investment to be effective. It could include:

• Saying “thank you” to a team member for going above and beyond on a customer service call 
• Creating an Employee of the Month award to highlight excellence and contributions to the team 
• Recognizing accomplishments on social media or your company’s intranet
• Calling out a team win in a town hall meeting 
• Taking the entire team out for lunch at the end of a special project 
• Using an internal social channel to share shoutouts of praise

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Support Your Employees With Nectar

Life on the other side of layoffs can be confusing for employees who may be in a daze about their job security, options, and suddenly increased workloads. 

Nectar is a recognition platform that boosts morale, improves teamwork, and motivates employees to do their best for your organization, even in hard times. The platform's main features include:

• Recognition: Peers, managers, and leaders exchange praise and redeemable points in Nectar's internal social feed. Each shoutout includes a personalized message and a hashtag related to the company value the recipient has demonstrated.
• Challenges: Employers set up custom challenges, which are a fantastic complement to your team-building initiatives. You might use steps challenges, book clubs, or any other type of team activity that encourages camaraderie and a healthy dose of competitive spirit. 
• Milestones: Employees automatically receive a celebratory message and Nectar points on their birthdays and work anniversaries to give them a boost on their special occasions. 
• Rewards: Employees of any rank or role exchange their accumulated points for a wide range of rewards, including Amazon products, gift cards, charity donations, company swag, or custom awards determined by the employer.

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Ready to support your surviving team members and create a company culture that feels safe and welcoming again? Book a free Nectar demo today.