Culture   //   September 6, 2023

Is RTO being used to slim staff instead of layoffs? 

Companies have been clear: return to the office or quit.

Earlier this summer, about 60,000 AT&T managers were told to return to the office by September. But with just nine office locations, 9,000 employees were left with the decision to quit or relocate. One manager described the change as layoffs disguised as an RTO policy.

Grindr, an LGBTQ+ dating site, gave employees just two weeks to decide if they could move within 50 miles of one of their three office locations by October. And Amazon’s CEO doubled down on the company’s RTO decision, saying that employees must work at a company hub three days a week or resign without severance.

It begs the question: are RTO mandates being used to slim staff instead of layoffs, which would require severance packages?

Workplace experts are saying yes, that could very well be the case. Dr. Gleb Tsipursky, CEO of hybrid work consultancy Disaster Avoidance Experts, has had leaders tell him in confidence that was their game plan. 

“Many companies are indeed using RTO mandates as a layoff strategy,” said Tsipursky. “This can be seen in patterns where companies first implement layoffs and then follow with an RTO mandate, or vice versa. A concrete example came from a conversation I had with the CHRO of a major retail company. She shared that she recently spoke to the CHRO of another company who explicitly told her that they are using RTO as a way to have layoffs without paying severance packages.”

Avoiding severance packages, helping a company’s finances

An RTO mandate on the surface seems like a more attractive option than traditional layoffs as it allows companies to reduce staff without incurring the legal obligations and financial costs associated with severance packages. Plus, it helps that it can preserve the company’s reputation. 

“When it comes to RTO, I don’t necessarily want to paint leaders as the villains twirling their mustache, but given my experience with CEOs, and our experience being a change management firm, we have to have some pretty direct conversations with leaders about what they want to do,” said Eric Mochnacz, a senior HR leader for change management company Red Clover. “It would not surprise me if there are some leaders out there who ultimately think that delivering the RTO mandate, employees they’ve had problems with or that they don’t get along with, may potentially quit. It saves them from having a difficult conversation and having to make any severance agreements and saves the company money in the long term.”

"It saves employers from having a difficult conversation and having to make any severance agreements and saves the company money in the long term.”
Eric Mochnacz, a senior hr leader for change management company Red Clover.

Not only does it save the company money because they don’t need to pay severance packages, but they are slimming their staff, and also making use of their real estate investments. 

But we know by now that the people who are going to leave during RTO mandates will actually not be the problem employees, but your best employees who are confident they can land a job elsewhere where they do have flexibility. And if enough people choose to quit, the company will begin to suffer.

“Then it becomes ‘well, so and so is really valuable to the company, so we are going to make an exception for them, they can still stay remote,’” said Mochnacz. “Once everyone else gets wind of that, you’ve lost your integrity of reason as to why you’re making people return to the office.”

That’s where legal concerns come in. Mochnacz says it can even be looked at as a discriminatory practice, whether intentional or not. Companies also run the risk of this RTO or quit scheme being perceived as constructive dismissal. Constructive dismissal is any time that an employer creates or permits working conditions that are so egregious that an employee feels that he or she has no reasonable alternative but to resign. We know it as quiet firing today

“If an employee moved to another state, and the company knew it, and now they’re doing RTO and we’re not accommodating anyone, if that employee perceives it as a way to terminate them, that employee can say it was constructive dismissal,” said Mochnacz. “It’s a company attempting to terminate someone without the potential responsibility of having to do a separation release, pay severance.”

The relocation issue with RTO mandates

It’s likely instances of the relocate-or-quit ultimatum as a part of a company’s broader strategy to reduce staff will become more common.

It’s not to say that the main goal of mandating RTO is to slim the staff, and for some companies that might not be what they’re hoping to do at all. RTO is also helping companies boost productivity, see their colleagues face to face, and make use of office space.

“Managers and employers feel like it is the only way they are getting their money’s worth from their employees,” said Mochnacz. “I think there is some valid reasoning behind it. These CEOs have made investments in their office real estate, and at the end of the day they are losing so much of that investment because they don’t have a way out of their lease.”

That said, job board Monster’s relocation poll found that one in four workers would rather quit than relocate, largely because of the cost of living crisis. 

“Companies are assuming a subset won’t relocate,” said Paul Wolfe, former HR exec and author of Human Beings First. “Are they going to backfill all of those jobs? Or, are they using this as a way to slim their workforce without doing a layoff?”

Most of the companies mandating a return to office are asking employees to move to a tech hub, which include cities like San Francisco, New York, and Austin to name a few. The cost of living in these areas are much higher than the suburbs, where most people relocated during the pandemic.

“Do you really need to move people back to a high-cost market?”
Paul Wolfe, former HR exec and author of Human Beings First.

“Do you really need to move people back to a high-cost market,” said Wolfe. “Are they going to force these markets that have cooled off to heat up again? There is a whole macroeconomic view to this too. It’s a decision that seems innocuous when you leave it on its own, but has such broad implications to so many things.”

Reassignments as another way to slim the workforce

And reassignments, dubbed quiet cutting — where the person is moved to a different position that they’re probably going to be unhappy with — is on the rise.

“Layoffs are always difficult … but let’s not make things worse,” said Jan Bruce, ceo and co-founder of workplace wellbeing platform meQuilibrium. “Trying to push employees to leave by ‘quiet cutting’ erodes trust in the workplace, especially for employees who remain. Companies must double down on rebuilding their workplace culture and increase trust — not erode it by pushing people out the door.”

According to recent research from experience management platform Qualtrics that surveyed 1,000 tech workers, 30% of their companies did an organizational restructure for a cost-cutting measure, right behind layoffs at 33%.

“These changes can have long lasting effects on companies and aren’t made lightly,” said Dr. Benjamin Granger, chief workplace psychologist at Qualtrics. “When it comes to rolling out organizational changes, it’s critical for leaders to share why and how things are changing, bringing as much transparency as possible to the process even if it’s to share when a yet-undecided decision will be made.”

Wolfe says that in worst case situations, it will lead to someone feeling like their only option is to resign.
“But you can also broaden your experience and skill set, which can make you more marketable down the road,” said Wolfe. “It could be a good opportunity to spread your wings and see how you can develop skills. In the case where someone wants to leave after a reassignment, hopefully the company would still offer severance.”

Ethical concerns

And there are major ethical considerations with using RTO mandates instead of layoffs. 

“Leaders should consider their actions in light of their organizational values, and the potential impact on employee trust and morale,” said Disaster Avoidance Experts’ Tsipursky.

It also could impact whether or not that person can apply for unemployment benefits.

“I’ve worked with enough business leaders to know, whether by design or intention, that they think using an RTO mandate instead of layoffs is an acceptable practice, but they’re opening the company up to a lot of risk,” said Mochnacz.