The Psychological Toll of Corporate Layoffs on Employees

Layoffs can be an overwhelming experience for individuals. It brings with it feelings of trauma and the stigma of being viewed as a failure or even a loss of a job. The layoff and its associated stigma can leave a lasting burst of negativity in individuals.

The impact of COVID-19 pandemic has affected the mental well-being of workers across the United States, particularly in the tech industry already. Over this, layoffs in corporations have become all too common, leaving employees feeling uncertain and stressed about their job security.

As per the Harvard Business Review, job security and the fear of being unable to provide for oneself and family have become a source of constant struggle. White-collar workers live with anxiety and self-doubt.

Here is a comprehensive guide on how layoff impacts victims psychologically after job loss.


Corporate layoffs can take a serious psychological toll on employees, particularly with the added stress of the COVID-19 pandemic. Those who keep their jobs may experience “survivor’s guilt” and are at risk of burnout. Unemployment can lead to severe physical and mental health problems, but the kindness and support of friends, family, and HR can help. Layoffs can disrupt life and lead to emotional and physical responses, and employees go through the stages of grief, including denial and isolation, anger, bargaining, depression, and acceptance. It is important to offer support and comfort during this challenging time.

Photo by Eric Prouzet on Unsplash

But first – let’s talk about Survivor’s Guilt

The phenomenon of “survivor’s guilt” has become a common affliction among employees who’ve managed to keep their jobs amidst the widespread layoffs. With constant reminders on social media of their laid-off coworkers and the uncertainty of their own job security, these employees often feel inadequate and are at risk of burnout.

What do researchers say?

American Psychological Association says unemployment can lead to severe physical and mental health problems and other health issues.

However, despite these challenges, laid-off workers can exhibit resilience in different ways. 

University College London’s School of Management has reported that social support and kindness from friends, family, and HR can go a long way in helping individuals cope with the psychological toll of unemployment. A severance package and unemployment benefits can provide a temporary safety net and allow individuals time to find new employment.

Anthony Klotz, professor at Texas A&M University, who first brought attention to the concept of “the great resignation,” has observed that the unemployed can take advantage of their newfound free time and embark on a journey of self-discovery and personal growth.

They can utilize this period to enhance their LinkedIn profile and ponder over their work experience, possibly discovering the remote job opportunity they have been seeking. Unemployment can thus become a time when individuals can explore and reevaluate their career path.

Many layoff victims don’t realize that the psychological impact of layoff isn’t limited to them. It has a ripple effect that affects every other employee and their family.

Microsoft continues with previously announced layoffs, as Seattle-area total nears 1,500 people


The upsetting feeling when layoffs disrupts life!

Being laid off can lead to a spectrum of emotional and physical responses, including shock, disbelief, irritability, frustration, loss of enjoyment, and worthlessness.

Layoffs are distinct from furloughs, where employees keep their job titles and benefits with the expectation of returning to work.

Workplace survivor syndrome is a spectrum of emotional reactions to layoffs that can strongly affect remaining employees, such as guilt, anxiety, grief, anger, and stress. It can lead to health problems such as depression and heart disease.

Moreover, layoffs are not fun, they disrupt life. 

Let’s look at the different stages an employee experiences during this episode.

The Stages of Grief during Layoffs

It’s crucial to keep in mind the limitations of any mental health framework. The generalization of the five-stage model of grief can be divisive and often criticized for oversimplifying the complex grieving process and neglecting the personal experience of individuals.

Despite the criticisms, it’s irrefutable that individuals go through feelings of sadness, anger, denial, and acceptance following a loss. And it’s worth mentioning that each stage of grief plays a crucial role in personal growth and healing.

Denial and Isolation

Denial is the first stage of emotional reaction, where an employee denies that an organizational change or layoff is occurring.

Also, it leads to isolation, where employees withdraw from relationships and become more secretive.

They may also be less likely to speak up or ask for help, which can further isolate them.

Job displacement can lead to loss of health benefits, pension accrual, asset impairment, and interruption of gain-in-years (GIO).

Women typically experience longer spells of unemployment after displacement than men.


Anger follows denial. It can ignite intense and painful emotions among affected employees. It’s completely normal for employees to feel angry with the organization, as job insecurity evokes a psychological reaction in them. 

Also, job loss can cause depression and guilt for those who have managed to hold onto their employment. The arrival of a new manager or business strategy can further deepen emotions among those laid off when they get the news. 

With the emotional toll that job losses take on everyone involved, it becomes crucial to offer support and comfort during this trying time.


Employees may engage with their employers in a bid to save their job. While some plead for the job back, some leave with dignity.

The bargaining process often encompasses negotiations about compensation, perks, and job duties.

During the bargaining process, employees may experience feelings of urgency and helplessness.


We have already heard storing those who have been with the company for a long time and have established relationships with their colleagues. 

But, we let go. Many fall into the depression of this loss as work relations mean a lot to them.

After a layoff, it can be hard to build new relationships and find new employment. This emotional impact can lead to reduced self-esteem, making it difficult to find new work.


It is natural to deny the reality of layoffs when they first occur. Employees try to avoid facing the situation by clinging to false beliefs about the company or the industry. It may lead to conflict and resentment.

Eventually, employees will enter the stage of anger that may lead to conflict and resentment.

In the final stage of grief, employees start accepting layoffs as reality and begin looking for new opportunities.

The grieving process will likely vary for each person, but accepting the reality of job loss and moving forward is a common theme throughout all stages of grief.

The Long-Term Effects of layoffs.

The effects of layoffs are far-reaching and can last years after the job losses have occurred. A reduction in work hours, wages, or position can lead to many negative effects on mental health, including anxiety and depression, which can last for months or even years after the job loss.

These mental health complications can significantly impact an individual’s health and well-being. They also heighten the risk of future job-related difficulties and increase the need for professional help.

Besides, layoffs can lead to reduced income, which may lead to financial instability. It may further contribute to mental health issues such as anxiety and depression.

Furthermore, layoffs can cause job insecurity and uncertainty, which may negatively impact mental health regardless of the specific job loss event.

Increased Stress and Anxiety

In some cases, layoffs may lead to mental health conditions like anxiety, depression, and stress. The psychological distress caused by job loss compounds the uncertainty of finding new employment or facing future layoffs.

Decreased Self-Esteem and Confidence

A long-term psychological impact on an individual leads to a decrease in self-esteem and confidence. 

Job loss creates behavioral conflicts in the workplace, as workers may feel uncertain about their future. They live in scare, thinking about when they will have to leave. 

Additionally, layoffs can lead to depression among workers who experience sudden uncertainty and anxiety over their roles and future. 

It can result in reduced productivity in the workplace. 

Increased Risk of Depression and Substance Abuse during Layoffs

Losing a job can lead to depression, anxiety, and a decrease in self-worth. Job insecurity can harm workers’ attention during a widespread economic crisis.

Employees may experience a decreased trust in future employers and a reduced expectation upon re-hiring.

Studies have shown that job loss may increase the risk of depression and substance abuse.

Layoffs Impact on Family and Relationships

A layoff can be especially devastating for those who have been with the company for an extended period and built strong relationships with their coworkers.

Being laid off can lead to an individual’s sense of failure and make them feel like they are not valuable to other companies.

It impacts relations with family members, who may feel neglected and left out following the job loss.

What is the role of Employers in Mitigating the Psychological Toll?

To help mitigate the psychological toll of layoffs, employers must support the employees experiencing this phase of layoff.

Additionally, they must look at the root cause of this layoff.

Providing Support During Layoff Process

Employers must devise plans to mitigate the psychological impact of layoffs. They can do it by preparing and ensuring that the situation is in control with dignity and respect. 

During this process, employers should reduce redundancies in their workforce and ensure workers in essential services are not affected. They should also communicate with the employees well to ensure a smooth transition.

To support employees during layoffs, employers should understand the potential emotional and physical effects on their health and well-being. 

Additionally, they must ensure that employees are eligible for unemployment insurance depending on their state’s eligibility requirements. 

Addressing the Root Causes of Layoffs

Organizations may lay off employees to reduce costs or amid a shift in markets served or operations. Layoffs are often needed to address business challenges, but they can be burdensome and disruptive for employees.

Complex layoffs involve significant numbers of employees with different job classifications and require extensive planning and need assessment.

To prevent layoffs, companies may consider restructuring positions, developing new job descriptions, and evaluating restructured positions. It can help organizations save money while providing a viable and effective workforce.

Besides, companies may offer longer-tenured workers a buyout as an inducement to leave voluntarily. It helps organizations avoid the cost of layoffs and allows them to focus on their core business goals.

Overall, addressing the root causes of layoffs is critical to ensure that organizations can continue to operate effectively and efficiently without compromising their mission or values.


The psychological toll of layoff is disturbing. But there are various things you can do to help mitigate the effects of layoff and help you get through it. 

Mostly by the employers as they create this scenario.

However, first of all, is support from family and friends. They’ve been there for you when times have been tough and will be there during your layoff. 

Also, remember that layoffs are inevitable, and not everyone gets laid off.

It’s important to recognize that not everyone experiences layoffs the same way.

Last but not least, remember that this too shall pass, and one fine day, you’ll find a new job.

Hoomale is a hub of thought-provoking articles on various subjects, from company operations to the mindset and behavior of young people to future work and tech. Stay informed and educated with our captivating reads.

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