Laid off Versus Fired: Discover the Difference

The term “layoffs” is getting its 15 minutes of fame lately. 

More than 77,000 American workers were laid off just in the beginning of 2023, a surge that stems from economic turmoil and recessions caused by the COVID-19 pandemic.

Getting laid off feels a lot like getting fired: you lose your job. And if you’re one of the 36.3 million Americans who lost their job in 2022, this fresh start might feel the same no matter the terminology used. 

But whether you’ve been laid off versus fired has implications on your financial security and future job prospects. Understanding the differences is vital to moving forward and getting your career back on track.

Being laid off means you’re let go, but not because you’ve done anything wrong. Instead, economic factors or organizational restructuring might indicate a company can’t afford your salary or doesn’t need that role anymore. 

Here are a few common reasons for layoffs: 

• Loss of funding: If financial grants and investments fund a company’s activities and they lose that money, the company might have to cut employees to compensate for the lost capital.

• Changed business needs: If a company pivots in response to market forces and changes its offering, those who work in departments deemed unnecessary could face layoffs due to lack of work.

Depending on the reasons for layoffs, the company might eventually rehire laid-off employees. Should the economic outlook improve, the company may decide to ramp up activities and expand its workforce by reaching out to people recently let go.

When you’re fired from your job, it’s generally because of something you did or didn’t do. Firing someone isn’t easy, but it’s often necessary to protect the company’s well-being. 

Reasons for dismissal are serious and can include the following:

• Conflict with coworkers or management: Not everyone gets along, but if you have a severe personality clash with teammates or leaders that’s getting in the way of work, it could result in a job loss.

• You’re not a cultural fit for the company: If you prioritize things your company doesn’t, like working from home, they might not think you’re a good cultural fit. In that case, the company may have no option but to cut ties.

• Availability: Frequent absences could make the company question your commitment to your job and the team. They may decide it’s better to let you go and find someone more dependable.

• No reason: If you’re an “at-will” employee, meaning you haven’t signed an employment contract, you can be fired from your job at any time, so long as their reason isn’t illegal.

Employers must adhere to contracts and policies when firing. Don’t sign anything if you suspect your termination breaks employment laws or has discriminatory reasons as its basis. Contact an employment lawyer for advice.

Knowing how to approach the job search depends on how you’ve been terminated. Here are three main differences: 

1. Responsibility

A key difference between the two termination types is where the responsibility lies. When you’re fired, it’s a singular action on the company’s part that’s typically due to your actions. You’ll usually know whether you’re getting fired if you’re watching for warning signs. 

Layoffs are much more abrupt. Even if you’re paying attention to profit reports and the business environment, changes occur quickly, and most employees aren’t involved in management discussions regarding layoffs.

And because of how layoffs work — they’re caused by large forces like economic downturns out of a company’s control — they often affect multiple employees at a time, causing job losses due to company actions and conditions outside the employee’s control.

2. Finances

Whether you were laid off or fired has a bearing on if you receive severance pay and unemployment benefits. Given that most people don’t have an emergency fund to see them through a financial crisis, knowing where you stand regarding access to financial support will be instrumental in planning next steps.

If you’ve been laid off, your former employer may offer you a severance package as a gesture of goodwill or out of obligation. If they don’t mention severance, ask if a package is available. Layoff benefits will help keep you afloat until you find a new position. 

Along with your final paycheck, you might also receive a one-time compensation payment equal to several weeks or months of your salary, outplacement services to help you find a new job, and a continuation of your health insurance.

You could also receive payment for any accrued vacation time.

When you’ve been fired, qualifying for benefits is less likely. Access varies depending on your circumstances and your state or jurisdiction. Contact an employment expert for advice on maximizing your chances of approval. 

Regardless of why you lost your job, you’ll qualify for COBRA health coverage if you sign up within 60 days of your termination date. You’re responsible for paying the premiums unless your severance agreement covers them. Health benefits are available for up to 18 months.

3. The job hunt

Whether you were fired or laid off, you’ll now have a gap on your resume potential employers might ask about. But the way you explain this job loss greatly depends on your circumstances. 

If you were laid off, simply say so, explaining why your role was downsized or how your company restructured. Remain positive and explain to potential employers what you’ve learned from the experience to show you have a growth mindset and are resilient when challenges arise. 

Answering a hiring manager’s questions about your previous job might be harder if you’ve been fired, but your approach should be the same — focusing on what you learned from the experience. Since 40% of American workers have been fired before, you’re in good company.

As a laid-off employee, you should be able to get a good recommendation from your employer, which will make the job search easier. Once you receive notice that your services are no longer needed, you should:

1. Collect your layoff notice: You may need proof you lost your job due to a layoff to qualify for unemployment benefits.

2. Clarify the reason for your dismissal: A prospective employer will most likely ask why you left your job. Your answer should match the one they receive from a reference check, if you weren’t already sure.

3. Ask for letters of recommendation: Ask for a reference letter right away to avoid inquiring when the company’s potentially shut down. 

After being fired

Beginning a job hunt after being fired is daunting. But with a bit of preparation, you can be open about your employment history and comfortable answering any questions an interviewer raises. Here are a few things to remember when beginning the hunt after being fired: 

1. Learn from the experience: The best way to recover from getting fired is by taking as many lessons as possible from the experience.

   How did you handle the job overall? Could you have dealt with getting fired more gracefully? What personal and professional growth would you like to take from this into your next position?

2. Be honest: Hiring managers can contact previous coworkers or employers to inquire about your dismissal, so be honest from the start. This paints your character in a better light, anyway, and shows you respect the recruiter and want them to have all relevant information regarding your application.

   Put your job loss in as positive a light as possible, discussing what you’ve learned and what you plan on doing differently. 

3. Shift focus: While you should be honest about the dismissal, shift focus during the interview to discuss more positive aspects of your application, like other work experience or transferable skills.

   You’re more than this one firing. Show off all your hard and soft skills, positive personality traits, and employee strengths to prove you’ve got what it takes to excel at this new role.

Whether you were laid off versus fired, this might be the nudge you need to enjoy a fresh start, recover from burnout, and prioritize self-care before your first day at a new job.