Being laid off vs. being terminated: What’s the difference?

If you’ve recently lost your job, in addition to dealing with the many emotions that come with such an event, you likely have a lot of questions. Or, you might be concerned that a layoff is coming down the pipeline, which also prompts a lot of emotions and questions. In either situation, the most pressing question is: what’s the difference between being laid off vs. terminated?

Being laid off vs. terminated

Being laid off vs. being terminated are two different ways of losing your job that come with varying consequences and next steps. Each can impact your eligibility for unemployment, your eligibility for reemployment, and your future job prospects differently. As such, it’s important to understand the difference between the two and which describes your current or potential situation.

When an employee is laid off

If you’re laid off, it generally implies you were part of a company-wide or department-wide layoff or severance program that was likely out of your control. In other words, it had little to nothing to do with your performance or job fit. Yes, some severance programs look at the bottom performers when determining their severance selection criteria, but that is not always, or even typically, the case.

In many instances, companies choose to lay off positions based on the bottom line and need to cut costs. Jobs with high salaries or that are deemed inessential are the first to go in these instances. In cases where restructuring is the primary reason for a layoff, positions that are not necessary for the new organizational structure are often let go. The case is similar when layoffs result from a merger and acquisition. Finally, when the reason for a layoff is a company going out of business, all positions would be terminated since they are no longer needed to run the business.

Some companies opt to offer a severance package as part of the layoff, which can include a certain amount of severance pay, as well as a continuation of health and wellness benefits for a set period of time. Often, the level of a severance package depends on years of service with the organization.

It’s also possible that a layoff is temporary. In such instances, the company plans for employees to return to work once the economic circumstances of the organization improve.

When an employee is terminated

An employee can be terminated, or fired, for a number of reasons. Termination can occur as a result of poor performance, a bad culture fit, misconduct, or other reasons deemed appropriate for termination by the employer. It’s also possible for the employee to initiate their termination by choosing to leave their job voluntarily.

When the employer terminates an employee, depending on the reason, they might choose to provide some form of payment or a brief continuation of benefits, though this is rare. In most instances, the final paycheck includes time worked through the termination date and any unused paid time off based on company policy. Benefits typically cease upon termination or by the end of the month that the termination occurs. If the employee voluntarily leaves, the same typically holds true for the final paycheck and benefits as outlined if the employer terminates the employee.

Being furloughed vs. laid off

Being furloughed is different from being laid off, in that being furloughed means that the organization plans for the employees to return to work in the future. A key difference in being furloughed vs. temporary layoff is that the employee can generally continue health insurance and other employer-sponsored benefits while the furlough continues. During a furlough, there is no guarantee that the position won’t be permanently terminated in the future, though the goal is for workers to return to work at some point.

Severance agreement requirements

If you’re part of a layoff or separation program, you’ll likely be asked to sign a severance agreement. The agreement outlines the terms of your severance and requires your signature to receive the benefits of the severance program.

Pro Tip: It’s best not to sign any documents directly following communication of a termination or layoff. Take some time to read over the documents provided to you and consult with a legal advisor to ensure your bases are covered before agreeing to the company terms. 

Unemployment eligibility

One of the most important factors in understanding whether you were laid off vs. terminated is your eligibility for unemployment benefits. Unemployment benefits provide a certain level of payment for those who are in between jobs.

Each state dictates what’s required for eligibility when it comes to approval for unemployment benefits. Where most states will allow you to receive unemployment benefits when terminated by the employer for performance or misconduct, if you can make a case that your termination was due to circumstances unrelated to those things, you might get approved for unemployment benefits.

Also, many states won’t approve unemployment benefits if you leave an employer voluntarily. Some exceptions that often apply to voluntary termination include if you leave an employer due to unsafe conditions and a lack of payment for work you performed. To determine the unemployment laws in your state, visit the Department of Labor’s Unemployment Benefits Finder page.

Future employment and reemployment

In cases of a layoff, it can be easier to explain why you left your last position to a prospective employer. Employers appreciate that layoffs happen and are often out of your control, so it doesn’t count against you as far as your hire-ability for the position. Also, most companies will rehire those who are part of a severance program for future open positions if it makes sense to do so.

When it comes to being terminated, some companies might state that you are not rehireable, depending on the reason, which can make getting hired at a new organization more challenging. Still, many job candidates regularly get hired into new positions at various companies after being terminated from their job, so there’s plenty of hope to go around.

Educate yourself to move forward

Ideally, organizations will be on the up and up when communicating with you about being terminated and laid off and your rights. However, that’s not always the case, so it’s up to you to educate yourself on your rights as an employee and what it means to be laid off vs. terminated. You’re well on your way by reading this post to ensure you understand the difference. From here, you can consult your company’s HR department and hiring manager and seek legal guidance as appropriate.

On a final note, though getting laid off and being terminated can come as a shock and be challenging, it is possible to move forward and land a new job, which might even be better than you could have imagined. Recruiting firms, career coaching and job boards are perfect places to navigate your next career move. Good luck!