Laid Off vs. Fired: What Are the Main Differences?

Updated March 16, 2023

Being "fired" and being "laid off" are both terms that refer to the termination of an individual's employment. A company may lay off an employee when it doesn't have the resources to retain them, while a company may fire an employee who isn't meeting the company's expectations. Understanding the differences between these two terms can help you recover from termination and approach your next job position more successfully.

In this article, we explain what being laid off and fired means, what situations call for each and how to discuss being laid off and fired in an interview.

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What does being "laid off" mean?

Being "laid off" is when an employer ends an individual's employment for reasons beyond their control. It usually occurs when the economy requires the company to change its staffing structure. Typical reasons for being laid off include:

  • Changing business needs

  • Restructuring

  • Acquiring or merging companies

  • Losing grants that covered employee salaries

  • Needing fewer employees due to reduced workload

  • Downsizing

Related: What It Means To Be Laid Off

What does being "fired" mean?

Being fired is another example of when an employer terminates an employee's employment. An employee gets fired for reasons under their control and when they do something wrong. An employer may fire an employee for reasons like inappropriate conduct or unsatisfactory job performance.

Related: 20 Things You Should Do After Getting Fired

Laid off vs. fired

Here are the key similarities and differences between being laid off and being fired:

The initiating party

These two terms are similar in the sense of who initiates the termination of employment. When an employee gets laid off or fired, the employer is always the initiating party. Being laid off and being fired are unlike voluntary resignation, which is when an employee chooses to leave their place of employment on their own terms.

The reasons for termination

One of the main differences between being laid off versus being fired is that being fired is the result of an employee's actions, while a layoff is the result of the company's actions. A company may lay off an employee because of limited resources, while a company may fire an employee for taking too much unapproved time off or failing to comply with company policies. Being fired has a negative connotation and there's little prospect of being rehired in the future. Laid-off employees may be able to return to work for the company when the economic situation improves.

The compensation that the former employee receives

Laid-off employees may receive severance pay or benefits from their employer and can include salary or insurance for a short time following the termination. The employer may also offer outplacement services to assist with the process of finding a new job. In most cases, employers don't offer severance packages to employees that they've fired.

Another difference that relates to compensation is unemployment compensation. If an employee is fired, they usually don't have access to unemployment benefits. If an employee is laid off, they may qualify for unemployment benefits. An employee can check with their state's unemployment agency for specific conditions.

Related: Guide to Unemployment Benefits (Eligibility and Tips)

The notice that the employer gives

Employers may give underperforming employees warnings to encourage them to improve their performance and conduct. They may have these employees complete a performance improvement plan (PIP) before considering their dismissal. When a company lays off some of its employees, the employees may not get much warning. Employees might be able to anticipate a potential layoff due to a company's changing structure, but an employee doesn't have a chance to redeem themselves, as the company's decision is often final.

How to discuss getting laid off in an interview

Here's how to answer the question, "Why did you leave your job?" when you got laid off:

1. Prepare your answer

Before the interview, practice answering this question without being emotional. Layoffs usually happen because an economic downturn affects the organization and reducing staff is the fastest way to reduce expenses. Present the facts objectively and demonstrate your understanding of the economic world in which you live.

2. Stay calm

Layoffs happen and hiring managers are aware of this fact. It might've been an emotionally challenging situation for you but it's essential to stay neutral and speak positively of your former employers. When interviewers ask you why you left that job, answer honestly and professionally.

3. Keep it short

It helps to quickly move on to another topic once you answer the question. You want to keep the meeting positive. You can share something you learned to redirect focus to your skills. Here's an example answer to help you prepare your own:

"My previous company manufactured items with a specific raw material. Last year, because of a natural disaster, the material became extremely rare and more expensive to mine. The company couldn't raise the selling price to stay profitable, so it stopped producing this item. Since my team was responsible for the production of this item, we were laid off. After that, I decided to broaden my expertise and obtain new certifications in working with different material types and completing various manufacturing processes. I believe I can be an asset to your company, and I'm excited about this unique opportunity."

Related: How To Address Why You Were Laid Off

How to discuss getting fired in an interview

Here's how to answer the question, "Why did you leave your job?" when you got fired:

1. Be honest

Because of its negative connotation, it might be tempting to conceal that you were fired. Be honest about the situation. The interviewer may appreciate your transparency and see you as an honest candidate to fill their available position.

Related: How To Maintain Professional Integrity in the Workplace

2. Stay positive

Whatever the circumstance was, take responsibility for it with maturity. This involves not blaming your previous employer for what happened. Act professionally and communicate honestly and positively with your prospective employer.

Related: Positive Thinking in the Workplace: Benefits and Tips

3. Show that you learned from your mistakes

The ability to face errors is a sign of maturity and quality that employers appreciate. Explain that you learned from your mistakes and that they made you even more determined to contribute to the success of your next employer. Focus the conversation on your willingness to move forward in your career. Here's an example answer to help you prepare your own:

"My previous job ended up being different from how I interpreted the job description. I didn't have the right skill set for the required job but I learned a lot from this experience. I took the time to reflect on my strengths and I understand that the position I'm applying to now suits my skill set much better. I love meeting new people and getting in contact with clients, and I'm excited to have the opportunity to do so working as a sales associate for your department."

Related: 10 Tips For Answering “Why Were You Fired?

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Tips for when your employer terminates your employment

Here are some tips that can help you take the next steps to move forward:

  • Ask your employer why they dismissed you, as their answer can clarify the situation in terms of how you may improve your performance for a future position.

  • Verify with your human resources (HR) representative the compensation, if any, and when you can expect to receive your last paycheck.

  • Before signing any agreement, consult an employment attorney if you have any doubts or concerns about the terms the HR department asks you to accept.

  • If you were laid off, ask your supervisor for a letter of recommendation or reference. This can make it easier to show potential employers that you were dismissed for reasons beyond your control.

  • Check with your state unemployment office to determine if you qualify for unemployment benefits.

  • Transfer the value of your 401(k) plan into another plan. Your HR department can help explain your options.

  • If you got laid off and didn't receive a severance package, ask for one. Even if the employer has no legal obligation to give you one, you can negotiate for it.

  • When you interview for a job, speak positively about your previous employer. Refrain from making negative comments on social media or within your professional network.

  • If you lose your job, stay busy and productive. Learn something new, volunteer or network, and take the time to prepare for your next professional challenge.

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