Laid Off versus Fired—Why Does It Matter?

While it may not feel like there’s much of a distinction to be made between being laid off and getting fired—they both ultimately result in the loss of your job—the fact is, there are considerable differences between the two. Further, the differences in the consequences each carry are considerable, and can be easily discerned almost immediately upon termination. In order to understand why it really matters, let’s take a look at what it means to be laid off versus being fired.

Laid Off vs Fired

What it means to be laid off

Getting laid off is typically the result of changing needs within a company and is not due to any fault on the part of the employee. Layoffs can be temporary or permanent, but usually occur when there is not enough work or money for the business to be able to continue to keep certain workers employed. 

Why it matters

Losing your job is rough, but it’s a lot harder if you have no savings or safety net in place to fall back on while you search for new opportunities. Getting laid off rather than fired can make the transition period a little easier in a couple of different ways:

1. Severance

Though it is not guaranteed, workers that have been laid off will often be provided a severance package. Severance agreements usually include a specified number of weeks of pay—typically based on how long the employee has worked for the company—and, may also provide the opportunity for the employee to continue their group medical/dental coverage through the Consolidated Omnibus Budget Reconciliation Act of 1985, 29 U.S.C., more commonly known as COBRA. Although you may still be eligible for continued coverage under COBRA even if you’re fired, as part of a severance package for an employee that has been laid off, the employer will continue to pay their portion of the employee’s healthcare premiums.

2. Unemployment benefits

Another important distinction between getting laid off and being fired is the ability to receive unemployment insurance benefits. Each state sets its own rules regarding eligibility, but most states require an involuntary loss of work in order to qualify. That is to say, the worker must have lost their job through no fault of their own. Both quitting your job and being fired are considered voluntary in terms of job loss.

Note: if you receive severance pay, you may or may not qualify to receive unemployment benefits depending on the amount you are paid, and the requirements set by your state. Either way, having some sort of income while you look for a new job can certainly be a lifesaver.

What it means to be fired

While employers with at-will employees do not have to provide justification for terminating an employee as long as it is not for an illegal or discriminatory reason, being fired most often stems from an employee’s misconduct and/or poor performance on the job.

Why it matters

Aside from the financial fallout caused by the sudden loss of income, combined with potentially missing out on unemployment benefits and/or severance pay, being fired could have a negative impact on future employment opportunities as well. Informing a potential employer that you were laid off when your company went out of business, or that you were part of a workforce reduction due to restructuring within your company carries far less stigma with it than having to explain you were fired from your previous job for cause. While it won’t necessarily prevent you from getting another job, it could make getting the job you want much harder.

At the end of the day, while people may use the terms laid off and fired interchangeably, they do have very different meanings and consequences. It’s true that both result in the loss of a job but being laid off rather than fired really can make everything a little easier on the road to rejoining the workforce.

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