Termination Culture: Is Company Loyalty a Thing of the Past?

Loyalty is often viewed as a two-way street, especially in the workplace. For decades, employees have believed that if they work hard, stay loyal, and give their best to the company, their efforts would be rewarded with job security and opportunities for growth. However, in recent years, a growing trend has shifted this narrative. Many loyal employees, who have invested years in their companies, find themselves facing terminations or downsizing, raising a critical question:

Are companies still loyal to their loyal employees?

The Evolution of Termination Culture

Historically, we had a workplace culture where long-term employment was highly valued. Employees often spent their entire careers at one company, rising through the ranks and enjoying the benefits of tenure. However, the business landscape has shifted dramatically. With globalization, economic fluctuations, and technological advancements, companies are constantly adapting. This agility, while crucial for staying competitive, has also fuelled a more transactional approach to employment.

Terminations and layoffs in Canada have been on the rise, particularly in the aftermath of the COVID-19 pandemic. According to a report from Statistics Canada, by the end of 2021, the unemployment rate had risen to 9.5%, the highest it had been in two decades, with a significant portion of these job losses attributed to terminations and restructuring efforts across industries . Even after the economy began to recover, many businesses chose to reduce their workforce to improve financial stability or embrace automation.

In 2022, the Conference Board of Canada reported a 7% increase in corporate layoffs, even in industries that were rebounding. This suggests a trend where businesses are prioritizing short-term financial gains over long-term employee retention.

Increasingly, businesses are prioritizing short-term gains over long-term loyalty. The rise of precarious work, outsourcing, and reliance on contract workers means that permanent, stable employment has become less common. Layoffs and terminations, once considered last resorts, have become a frequent part of organizational restructuring.

The Impact on Loyal Employees

The psychological contract between employers and employees—an unspoken understanding that loyalty will be rewarded—is being broken.

Long-serving employees, even those with excellent performance records, are being shown the door in favour of cost-cutting or reorganization efforts. This trend is particularly concerning for older employees, who may find it harder to re-enter the workforce and are often overlooked during rehiring processes.

According to a survey by the Mental Health Commission of Canada, 46% of Canadian employees reported feeling stressed or anxious about job stability in 2023, a figure that has been steadily increasing over the past few years. Additionally, the economic uncertainty and layoffs have been linked to a rise in mental health challenges. A 2022 study by Morneau Shepell (now LifeWorks) revealed that employees who have experienced or fear layoffs are two times more likely to suffer from anxiety, depression, and burnout . This has not only affected individuals’ well-being but has led to decreased productivity and engagement, creating a ripple effect throughout entire organizations.

For employees who have dedicated years to a company, the sense of betrayal is immense. They have given their time, skills, and energy, often sacrificing personal ambitions, with the belief that their loyalty will be reciprocated. Unfortunately, many find that companies, driven by the need to stay profitable, view employees as dispensable.

Economic Pressures vs. Ethical Obligations

It’s important to recognize that companies are often under immense economic pressure to remain competitive, especially in uncertain markets. Downsizing and restructuring are sometimes seen as necessary steps to ensure long-term survival. However, does that justify the erosion of employee loyalty?

The decrease in employee morale is also tied to how terminations are handled. According to a study by Glassdoor, 60% of Canadian workers believe that companies are not transparent in their communication around layoffs and terminations, which exacerbates feelings of mistrust and uncertainty .

Many argue that businesses have an ethical obligation to care for their loyal employees, especially in times of transition.

Instead of abrupt terminations, companies could invest in retraining, offer voluntary severance packages, or provide support during career transitions. There’s also an argument for prioritizing internal mobility—helping employees move into different roles rather than terminating them.

The Shift Towards a More Human-Centric Approach

Despite the challenges, there is hope for change. The rise of employee-centric companies, particularly in the tech industry, shows that businesses can prioritize people and still be profitable. Employee experience, wellness programs, and a focus on long-term growth are slowly gaining traction.

Canadian HR professionals are increasingly advocating for fair treatment during terminations, ensuring employees are treated with respect and given proper support.

Moreover, with the increasing awareness of mental health and wellness, many organizations are being held accountable for how they handle layoffs and terminations. Forward-thinking companies are beginning to realize that fostering a supportive work environment not only benefits employees but also positively impacts business performance in the long run.

According to a 2023 report by Deloitte, companies with high levels of employee engagement and loyalty outperformed their peers by 147% in terms of earnings per share .

Rebuilding Trust in the Workplace

For employers looking to repair the trust that has been lost, it’s essential to rethink how terminations are handled. Offering transparency in communication, providing clear reasons for layoffs, and genuinely investing in employee well-being can go a long way in rebuilding trust.

Loyalty should be a two-way street, where employees feel valued and secure, and employers gain the benefits of having a dedicated, long-term workforce.

Employees, on the other hand, may need to reassess their expectations of loyalty in the workplace. As the termination culture becomes more prevalent, the concept of job security may evolve. It’s vital for workers to stay adaptable, continuously upskill, and prepare for changes in the job market. Understanding that career growth may no longer be linear can help employees navigate these shifts with greater resilience.

The termination culture is a growing concern that reflects a broader shift in how companies manage their workforces. While economic pressures are real, companies must not forget the human element at the heart of their organizations. A balanced approach—one that recognizes both business needs and employee loyalty—can lead to healthier workplaces and, ultimately, better business outcomes. It’s time for companies to remember that loyalty should never be a one-way street.

References:

1. Statistics Canada. (2021). "Labour force characteristics, monthly, seasonally adjusted and trend-cycle." Available at: https://www.statcan.gc.ca
2. The Conference Board of Canada. (2022). "Corporate Layoffs in Canada: Trends and Insights." Available at: https://www.conferenceboard.ca
3. Mental Health Commission of Canada. (2023). "Mental Health in the Workplace Report." Available at: https://www.mentalhealthcommission.ca
4. LifeWorks (formerly Morneau Shepell). (2022). "Workplace Mental Health Report." Available at: https://www.lifeworks.com
5. Glassdoor. (2023). "Employee Layoffs Survey Results." Available at: https://www.glassdoor.ca
6. Deloitte. (2023). "The Value of Employee Loyalty: Canadian Insights." Available at: https://www2.deloitte.com