Layoff is the temporary suspension or permanent termination of employment of an employee or (more commonly) a group of employees for business reasons, such as the decision that certain positions are no longer necessary or a business slow-down or interruption in work. Originally the term "layoff" referred exclusively to a temporary interruption in work, as when factory work cyclically falls off. However, the term has also applied to the permanent elimination of positions as a cost-cutting measure (or for other reasons).

Further euphemisms are often used to "soften the blow" in the process of firing and being fired, including downsize, rightsize, smartsize, workforce reduction or workforce optimization, simplification and reduction in force (also called a "RIF", especially in the government employment sector). Mass layoff implies laying off a large number of workers. Attrition implies that positions will be eliminated as workers quit or retire. Early retirement means workers may quit now yet still remain eligible for their retirement benefits later. While redundancy is a specific legal term in UK employment law, it may be perceived as obfuscation. Firings imply misconduct or failure while lay-offs imply economic forces beyond ones control.

Reasoning

A lay-off is typically driven by one of several forces. In the first case, the goal is to decrease a company's labor cost. Typically the reasoning is that the company will be able to generate the same gross revenues in the future with a smaller number of workers: if the company's revenues do indeed stay constant while labor costs go down, then profit will increase. Additionally, some layoffs occur when management believes that revenue is forecast to go down: by reducing labor costs, companies can maintain profitability despite reduced sales. Enterprises with seasonal sales (ski resorts) or production (temperate forest logging) deal with lay-offs as a matter of normal business operations. Sometimes layoffs are a result of a company moving away from one skill set and toward another. Workers who cannot be retrained or do not wish to be retrainied are let go so that others with the desired skills can be hired in their place.

United Kingdom

It's important to distinguish the term "layoff" from redundancy in terms of UK employment law. The normal lay person's understanding of the term "layoff" is that one has been made redundant, i.e. that one has been dismissed. This isn't technically correct. Being "laid off" just means being sent home without pay or work. This doesn't mean one has been dismissed. Being laid off doesn't preclude a return to work when business picks up under exactly the same terms and conditions as before.