Why Lay Me Off and Hire Me Back as a Contractor?

My last position in corporate America was somewhere I thought I would stay for a while. I need a job that keeps me challenged, moving progressively upward in responsibility, and is very active. I thought I had finally found it. For the 18 months I had been employed, the company had been going through a global merger and the work method was “as fast as you can go.” I had already been promoted once and now was picking up signals of a new promotion possibility. I took a couple of days off after a big deadline was reached, and when I returned, I found out my company had been bought. ARHGGGG!

As leaders sometimes do, my employer started townhall meetings to answer employees’ questions about the acquisition. Having worked through issues during the merger, I had an opportunity to ask the CEO a question that had been puzzling me for a very long time – “why does a company lay someone off only to hire them back as a contractor? It seems counterproductive to pay them twice – once on severance and then as a contractor.”

My CEO explained. “It’s the elimination of the long-term commitment. An employee represents a long-term commitment over the life of their employment with the company.”

I have thought about this for a long time. I can’t find any financial correlation to this, such as a line item on a ?financial statement that current employees equate to “$X” as a commitment to wages. But there are liabilities that are related to pensions and retirement benefits as well as deferred or accrued benefits such as vacation pay and liabilities related to other employee benefits. And if revenue is decreasing, the ratio of earnings to liabilities becomes tighter and could place the company into a difficult funding position.

From the position of the Acquirer – trying to put myself in their shoes – those liabilities could be unattractive. As the Acquirer, I have my own employee workforce that is my first loyalty. I’m purchasing this company to enhance my market position and/or my revenue. I don’t want to absorb all of the expenses of the company I’m buying, I just want the good stuff – the revenue producing stuff. I’m going to look for operational stuff that is redundant – like Finance, Human Resources, Procurement, Legal, etc. I’m going to suspect that my current operations can probably absorb the acquired operations with a few additional FTEs. I might have better processes or stronger technology that will simplify the work. The primary interest I have is in the areas that produce revenue – I’m buying their ability to generate revenue.

For those of us that experience the loss of a job, it is very personal to us. But the organizations that are making these decisions are basing it on the numbers and best practices for acquisitions and realizing the anticipated return on their investment. They are sorry for the negative impact on people (hopefully), but these decisions have to be made based on the game of business at the macro level.

For me – when I experienced it – it was the second time in three years that I had lost a position that I loved. The first time, I left voluntarily because of a very toxic environment. I was “run off” as they say by a toxic colleague and a toxic boss. Then this, just 18 months later. I didn’t have the heart to go after a new position right away – my heart was broken.

But in hindsight, I can see how much I benefited from these events. It led me to take the leap into independent consulting where I gradually found a working style that was both more challenging and more rewarding. I grew as an individual because I learned to hustle for my own paycheck. And I increased or developed skills like resilience, determination, self-confidence, research, a tougher skin when rejected, the ability to assess my worth independently, a long-range vision, cashflow planning, and strategy. I don’t know if I would have developed my expertise if I hadn’t had the challenges and uncertainties of losing my job.

So, to all of you who have experienced this painful event, my support goes out to you. It is not about you at all – it is an organization shifting. And employees are a fluid and mobile asset. You will survive and thrive – don’t lose faith. The ground beneath you is shifting, but you will regain your bearings and stand tall again.

To all of you who contacted me about the HR Consultant position, I am thrilled to connect with you. The team I was recruiting for has been fulfilled. But your interest and enthusiasm has my thinking cap on and I see an opportunity for us to support each other. Stay tuned for more information about that.

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