Layoffs in the AI era: A practical playbook for HR leaders
Automation and hyper-competitive, profit-driven strategies are reshaping work. The rise of Generative AI, paired with a weak global economy, has triggered surprise layoffs and forced resignations across sectors. As of 3 October 2025, 91,314 tech employees had been laid off by 208 companies, according to layoffs.fyi.
Some firms still execute abrupt cuts-Zoom firings, vague emails, even system lockouts-seen at X (Twitter), Alphabet, Better.com, Frontdesk, and others. Many, however, are moving toward severance, insurance coverage, extended notice periods, and outplacement support. HR decides which path employees experience.
The HR dilemma: Transparency, fairness, compassion
HR's job is to protect dignity while protecting the business. Leaders in human capital consistently come back to three pillars.
- Transparency: State the business case plainly. Explain what changed, alternatives considered, and why this decision is a last resort.
- Fairness: Use objective criteria tied to business needs, not manager preference or convenience. Standardize severance and notice by role/tenure.
- Compassion: Deliver the message live. Provide time, information, and access to benefits, counseling, and job search resources.
As one CEO put it, employees need honesty so they know the company had no other option. Another founder emphasized that clear communication, counseling, and reskilling support can turn a painful exit into one marked by dignity. "Decisions must be based on clear business requirements, not on personal biases," added a talent advisory leader.
How to run a humane process
- Before: Align executive narrative; pre-brief managers; prepare FAQs; ready severance letters, benefits info, and outplacement details.
- During: Communicate 1:1, live. Avoid system lockouts before the conversation. Be specific about the reason, last working day, pay, benefits, and references.
- After: Keep systems open for a defined window for data retrieval; share job boards and referral programs; assign HR and manager follow-ups.
- For survivors: Hold a town hall; reset priorities; address guilt and anxiety; communicate a concrete plan to prevent repeated cuts.
Psychological fallout: What HR should expect and support
Job loss does more than disrupt finances. It often triggers self-doubt, anxiety, and a sense of rejection-especially for mid-career professionals. One case shared by a psychologist involved a senior leader promoted to country head, only to have his department eliminated months later.
The takeaway for HR: reduce uncertainty fast and offer real help. Provide transparent reasons, mental health access, and career-transition support. Encourage reskilling and structured job-search plans to counter overthinking and a spiral into "failure" narratives.
- Counseling access and mental health days
- Resume, LinkedIn, and interview clinics; alumni groups; curated job leads
- Reskilling pathways for adjacent roles and internal mobility where possible
Legal perspective in India: Layoff vs. retrenchment
Indian law distinguishes between a layoff (temporary) and retrenchment (permanent termination) under the Industrial Disputes Act, 1947. Section 2(kkk) defines a layoff as a temporary suspension of work due to reasons like shortage of raw materials, machine breakdown, or natural calamity. Under Section 25C, eligible workmen are entitled to 50% wages during the layoff period.
Section 2(oo) defines retrenchment as permanent termination for reasons other than voluntary retirement, superannuation, disciplinary action, or ill-health. Forced resignations fall under retrenchment and, if done without required permissions or process, are often treated as unlawful terminations in disguise. Work closely with counsel on notice, compensation, and government permissions where applicable.
For reference, see the Industrial Disputes Act on India Code: Industrial Disputes Act, 1947.
Case example: TCS's approach
This year, Tata Consultancy Services announced plans to reduce headcount by around 2% (about 12,000 roles) as part of restructuring. Unlike many peers, reports indicate TCS is offering severance of up to two years' salary for long-serving employees.
The company stated that affected employees will receive outplacement support, notice periods, and mental health resources under its "TCS Cares" program. The signal to HR: even large-scale restructuring can be paired with support that preserves trust and brand equity.
HR action checklist
- Plan the business case, criteria, and risk review with Legal and Finance.
- Audit selection criteria for bias; document decisions and approvals.
- Standardize severance, notice, benefits continuation, and eligibility.
- Humanize delivery: manager + HR present; give space for questions.
- Protect dignity: no surprise lockouts; controlled access offboarding.
- Support exits: references, alumni network, outplacement, counseling.
- Stabilize survivors: role clarity, resourcing, and workload resets.
- Review lessons learned; invest in workforce planning and reskilling.
Reduce future layoffs with reskilling
Laying off is expensive-financially and culturally. A practical hedge is redeploying talent through targeted upskilling for AI-augmented roles. Start with role mapping, short learning sprints, and internal mobility.
If you are building structured reskilling paths, these resources can help:
- AI courses by job role for clearer internal pathways
- Popular AI certifications to standardize skills signals
What HR can influence-starting now
- Require a transparent business case and documented alternatives before any reduction
- Hold leaders to fair, bias-checked selection criteria and consistent packages
- Commit to humane execution: live conversations, clear information, meaningful support
- Build an internal reskilling engine so restructuring becomes redeployment first, exits second
Layoffs may be a byproduct of automation cycles, but how they are handled is squarely in HR's control. Choose clarity. Choose fairness. Choose compassion.
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