A slick and devious way to underreport layoffs in the corporate world - “ask employee to resign”

Many organizations and tech firms are going through rounds of layoffs and only some are making headlines in the media. The reason why a large percentage of layoffs are going underreported is because managers aided by their HR partners have come up with a crafty carrot-and-stick way of asking employees to resign. 

This technique is probably a variance of Voluntary Retirement Schemes (VRS) that have been refined by organizations over the years and remain highly popular because:

• They reduce financial burden by retiring senior, higher-paid employees, thereby lowering overall costs.

• Senior employees often have negotiated benefits such as better retirement contributions and health insurance, which may have been "grandfathered" and are not available to newer employees.

• Retirees are typically replaced with younger, lower-paid workers, further reducing salary expenses.

• While offering a VRS package incurs some upfront costs, companies justify it based on the expected return on investment (ROI) and long-term savings.

Multinationals and tech companies that have been through earlier rounds of VRS may not have a large enough pool of employees eligible for VRS, so executives, guided by crafty HR partners have begun to devise a tactic by asking employees to resign.

Case in Point

A manager I have been mentoring recently shared his experience from a previous job. He was called into a meeting with his manager’s skip-level manager and an HR partner. The manager explained that the company was undergoing a transformation, affecting multiple business divisions. He was informed that his team was being downsized and that everyone, including his own manager, was being asked to resign. After this introduction, the HR partner took over to explain the “process”:

• He would need to resign immediately and would be placed on "paid garden leave" for the duration of his notice period.

• He was offered severance pay equivalent to one month's gross salary for each year of service.

• A document outlining the severance terms and a non-disclosure agreement would be provided.

• He would receive outplacement assistance through a firm the company had engaged.

All of this was contingent on his immediate resignation.

“What if I don’t resign,” my mentee asked. The response was predictable - he would be let go immediately without any severance benefit. 

This “ask employee to resign” is a carrot-and-stick tactic that has obvious benefits for the organization. They don’t have to publicly announce “layoffs” and avoid negative press. The organization doesn’t have to report such layoffs to authorities since these are technically resignations or “voluntary separations”  

The theory says that framing the resignation as a mutually beneficial decision can help the employee transition more smoothly. However, in practice, there is no sugarcoating layoffs.