Why the Difference between Being Fired vs. Being Laid Off Matters More Than You Think

TL;DR: Losing your job can be a traumatic experience, but not all terminations are the same. Being fired means that you were dismissed for reasons related to your performance or conduct, while being laid off means that you were let go for reasons related to the company’s situation. The difference can have a big impact on your finances, your reputation, and your future career prospects. As I've heard this come up several times over the last few months, I thought to explain why you should know the difference and why you shouldn’t confuse the terms.?

Prologue

Imagine this scenario: You’re a hard-working employee who has been loyal to your company for years. You’ve always received positive feedback and praise from your managers and colleagues. Then, one day, you get a call from HR telling you that you’re being let go. They say it’s not personal, it’s just business. They say it’s a layoff, not a firing.

But is it really?

More and more, people are experiencing this situation: some for the first time in their careers, for others, it’s a repeat of a bad previous nightmare. If you’ve ever been in this situation – or know someone close to you who has – you may be wondering about the difference between being fired and being laid off. And why does it matter?

The difference isn’t trivial or negligible. Not only can it have serious implications for your finances, it can impact your reputation, relationships, and career prospects. Heck, it can make or break your career.

Don’t use these two terms interchangeably.

If you’re one of the employees who remain employed at the company that laid off your peers, you might feel a mix of emotions: relief, guilt, anger, sadness, fear. You might also feel confused and frustrated when you hear peers, managers, or even leaders use the wrong term to describe what happened to your former colleagues. And as an impacted employee, it can be disheartening to hear the term “fired” callously and erroneously used.

Given the number of discussions I’ve had over the last few months about layoffs across the industry and at Microsoft, I thought it would be worthwhile to explain why being fired and being laid off are not the same thing, and why you should never confuse them.?

Here’s why:

Being Fired Is About You. Being Laid Off Is About the Company.

In Elizabeth Alterman ’s article Laid Off Vs. Fired: The Key Differences You Need to Know, Adam Calli, MSM, SHRM-SCP principal consultant at Arc Human Capital, says that being fired means that the company still needs the work done, but not by you. It means that your performance, behavior, or attitude was not meeting the company’s expectations or standards. It means that you did something wrong, or at least something that the company didn’t like.

But being laid off means that the company no longer needs the work done at all, or at least not by as many people, and that with the reorganization and restructuring, your position (as well as potentially thousands of your compatriots) was eliminated. The reasons behind the decision were beyond your control – whether it’s the economy, downsizing, changing needs of the business – and it means that you did nothing wrong. (That’s often a hard pill for people to swallow.) And more importantly, your skills and contributions are still valuable in the industry… and even possibly at your employer, just not in your role.

Being Fired Can Hurt Your Reputation. Being Laid Off Can Boost It.

When you’re fired, you might face some stigma and judgment from others who assume that you were incompetent, unethical, or difficult to work with. Alison Doyle writes in Getting Fired vs. Getting Laid Off?that you might have difficulty explaining why you left your previous job to potential employers, particularly as many are more selective and wary to hire someone who was terminated for a policy issue or cause. Getting fired can result in struggles with your confidence and self-esteem, and leave you wondering if you’re good enough for any job. (Being fired can also leave an indelible mark in your memory. I clearly remember the two times I was fired, both early in my career: the first was from my first real job with a paycheck, at the Mid-Niter Super Drugmart. Of course, the world and personal priorities were different when I was 12.)

But when you’re laid off, you might receive sympathy and support from others who understand that you were a victim of circumstances beyond your control. You may have an easier time finding new opportunities, given employers are often more willing to hire a candidate let go due to factors beyond their control rather than personal ones. You might also feel more motivated and resilient, knowing that you have valuable skills and experience that can help you bounce back.

Being Fired Can Limit Your Benefits. Being Laid Off Can Expand Them.

When you’re fired, you might not be eligible for certain benefits that could help you cope with the loss of income and stability. Unlike benefits you may’ve seen extended provided by unions and in countries with strong works councils (such as those in France and Germany), you may?not qualify for unemployment insurance, lose health insurance and other employer-provided benefits, miss out on severance pay, professional and recruiting services, and other support that could help you find your next job.

But when you’re laid off, you may be entitled to substantially more support, with varying degrees of benefit.?Some of the ways Microsoft demonstrated its company values – respect, integrity, and accountability – during the wave of layoffs included “above-market severance pay, continuing healthcare coverage for six months, continued vesting of stock awards for six months, (and) career transition services” to the employees, in the hopes of demonstrating a level of care, personal development, and growth of its employees… even when parting ways. (More on this in an upcoming post.)

People may use the wrong term. Using the right one is important.

You may wonder why people can’t tell the difference, and why they may not consider (or even care) that they’re using the wrong term. Based on what I’ve heard, you’re not alone. What peers and leaders say can have an impact on the people who lost their jobs as well as the people who remained. As an employee who encounters this situation, you may struggle with how to respond: here are some things you can do:

Speak up.

Don’t let managers and leaders get away with using the wrong term to describe their termination. Let them know that it’s disrespectful and inaccurate to say that they were fired when they were laid off. Explain that being fired implies that they did something wrong or failed to meet the company’s expectations, while being laid off means that the company no longer needed their position due to economic or strategic reasons. Remind them that your laid-off peers were valuable and competent employees who deserve recognition and respect for their contributions. (At Microsoft, it’s Review season (aka Connects), and there’s an opportunity to acknowledge how your peers – both at the company and departed – contributed and enabled your success, and how it was built on the work and ideas of others when considering the attributes of successful teams.)

Support your peers.

Reach out to those who've been laid off and provide more than your sympathy: provide the empathy, time, attention, and assistance they may need. Everyone's different.?Let them know that you appreciate their work and friendship, and that you’re sorry for what happened to them. Offer to help them with their job search, such as by providing referrals, recommendations, or feedback. Stay in touch with them and check in on how they’re doing. Don’t let them feel isolated or forgotten.

Correct by asking questions.

Sometimes, asking a question can be a more effective way to correct someone than making a statement – a classic Alex Trebek move. “How did you come up with that term?” “What’s your source for that information?” Or even “Is that the right term?” It can help people realize their mistake on their own, or prompt them to explain their reasoning.

Call it out, and be nice.

If this comes up in discussions and you feel the need to point it out, do it politely: I get frustrated when people use the terms incorrectly. While it can be annoying, not every instance is worth correcting – but when it is, do it with tact. First, try to correct them in private, rather than in front of a group of people. In meetings, I was known to send people instant messages with course corrections or subtle questions to get them to think about the direction they were taking, rather than blurt out that was the stupidest thing I’d ever heard. If you must correct them in public, do it discreetly and respectfully, calling out the misunderstanding, and avoid sarcasm or anger. It’s all in the way you say it.

Epilogue

Think again about your own situation.

When you lose your job, it can feel like a personal failure or a professional rejection. But not all job losses are created equal.

There’s a big difference between being fired and being laid off. One is about your performance, the other is about your circumstances. The distinction matters not only for your finances, but also for your identity, your relationships, and your future.

If you’ve been fired, own your mistakes and learn from them.

If you’ve been laid off, acknowledge your emotions and extend yourself the grace to move on from them.

And if you’re a leader who has to fire or lay off someone, be honest and respectful. Don’t sugarcoat the truth or blame the victim.

A job loss is not the final verdict on your worth or potential. It’s a chance to think again about who you are, what you value, and how you can contribute to the world.

What advice do you have for others who encounter this situation?