Almost every organization is faced with the necessity of laying off employees for lack of work. Some layoffs are temporary and are expected by employees because of the nature of the job. These layoff can be planned for and may not be serious. In contrast, a change in operations or decline in business necessitates permanent layoffs. All of these involve employee separation from the organization. Separation may also arise from employee resignations and retirement.

Layoff can be defined as an indefinite separation from the payroll due to factors beyond the control of the individual. The causes of layoff include decline in sales, shortage of raw materials, market fluctuations, delays in production and displacement caused by technology. Layoff is a temporary separation when it is initiated by an employer. But some times, it turns out to be permanent when production never picks up. Layoff is considered to be a serious issue because of the involvement of human sentiments and adjustment problems.

Seniority rule may be followed for layoff, as often demanded by unions. When seniority is explicitly stated as the primary factor, long-service employees know that they will not be the first to go if operations decline, and they have a pretty good idea of what to expect in the future.

Seniority is a highly complex issue. It is perplexing issue to determine what type of seniority should be used during layoff periods. Obviously, the union stresses the company wide seniority system. In cases where this type of seniority is used, the long service employees are bumping the short service employees if they are capable of doing their work. As this process disrupts the efficiency of the company, management usually stresses the departmental or unit seniority. Seniority is also used as a basis of recall when business picks up and the workforce expands. The workers may be reemployed in inverse order of layoff or in terms of their seniority.