What Happens to Employees After a Layoff? The Hidden Cost

Insights blog

The Part of a Layoff Nobody Plans For: What Happens to the People Who Stay

Date: September 5, 2026

Author: Brandy Zimmerman

Category: Leadership, People & HR

Estimated reading time: 7 minutes

Contents

What survivors actually experience, and why it matters
The flight risk nobody models
This is not a 2020 problem
What leadership thinks they’re doing, and what they’re actually missing
What to do next
References

Most layoff planning ends the moment the exits are announced.

Leadership spends weeks, sometimes months, on the mechanics: who’s leaving, how they’ll be told, what they’ll receive, what legal needs to review before anyone says a word. And then the announcement goes out, and there’s a collective exhale at the top. The hard part is over.

But it isn’t. The hard part is what starts the next morning.

What survivors actually experience, and why it matters

There’s an assumption baked into most layoff plans, which is almost always wrong.

The assumption is that the people who stay will feel relieved. Maybe even grateful. And that they’ll channel that into working harder, because they know they need to prove they earned their spot.

Leadership IQ surveyed more than 4,000 layoff survivors to find out if that’s actually what happens. It isn’t. The three emotions survivors described most frequently, in order, were anger, anxiety, and guilt.

Which, when you think about it, makes complete sense. Watching a colleague get walked out doesn’t just remove a coworker from your team. It removes the assumption that your job is stable. Anxiety follows because if it happened to them, it can happen to you. Guilt follows because you still have a paycheque and someone equally capable doesn’t. Anger follows when the explanation for who was chosen doesn’t quite add up, and it usually doesn’t.

None of those three states are compatible with focused, productive work. And they don’t resolve in a week or two. They settle in.

74% of survivors in that same study reported their own productivity had declined. 87% said they were less likely to recommend their organization as a good place to work. That’s not two separate problems. It’s one breakdown in trust, showing up in two places at once.

A 2023 Glassdoor analysis of nearly 200 companies that had conducted layoffs put the first-year cost of that disengagement at roughly $20.8 billion in lost productivity, almost entirely from the people who stayed, not the roles that were cut.

Most layoff budgets plan for severance, legal, and outplacement. Almost none budget for this. And it’s frequently the bigger number. Take the time to actually calculate it for your organization. The result tends to change the conversation.

The flight risk nobody models

There’s a second effect that tends to catch leadership off guard, and it’s the one that does the most damage to the team you were trying to protect.

Voluntary turnover. Not from the people who were let go. From the people who weren’t. The ones you wanted to keep.

A 2023 University of British Columbia study tracked nearly one million employees over 22 months and found that layoff announcements triggered an immediate, measurable spike in voluntary resignations among remaining staff. Not retaliation. Not solidarity. A rational, concrete sense that their own position might be next, whether or not that was actually true.

Most of that voluntary turnover happens within the first month after the announcement. That’s a faster timeline than most organizations can stand up any kind of meaningful retention response.

And the people most likely to walk are your strongest performers. They have options. They have less tolerance for uncertainty. And they carry the most institutional knowledge out the door with them when they go. The Academy of Management research on this is consistent: the layoff gets executed cleanly, and the organization still loses a meaningful chunk of the talent it was trying to keep. Not because the process failed. Because nobody managed what came after.

This is not a 2020 problem

I know the instinct is to file this under lessons from the last recession. It isn’t history.

Right now, tech companies are attributing headcount reductions to AI adoption, whether or not that’s actually the driver. Manufacturing is cutting into the tightest skilled-trades labor market in a generation. Nonprofits are eliminating positions mid-demand-surge because funding dried up. Accounting and law firms are correcting pandemic-era overhiring in professions that are already short on experienced people.

Different triggers. Nearly identical aftermath: a smaller team absorbing more work, watching leadership for any signal about what comes next, and making a decision about whether to stay.

That decision is what determines whether the reduction actually achieved what it was supposed to.

What leadership thinks they’re doing, and what they’re actually missing

Most leadership teams I talk to believe they’ve handled the aftermath reasonably well. They held a town hall. They sent a follow-up email. They told managers to check in with their people.

That’s a start. It’s not enough.

Leadership IQ found that employees who rated their direct manager highly on visibility, approachability, and candor were 72% less likely to report a productivity decline, and 65% less likely to report a decline in the quality of the company’s work. Visibility and a follow-up email are not the same thing as candor. And candor is where most plans fall apart.

Here’s what I see happening, over and over:

1. On transparency

Leadership believes they’re being open. What they’re actually doing is being vague in a way that reads as deliberate. “We had to make some difficult decisions” is not transparency. It’s a placeholder. People can handle a hard, specific truth. What wears them down is language that signals the real story is worse than what’s being shared. An explanation that actually lands sounds more like: “We lost the Meridian account, and this reduction is what keeps us solvent without cutting further.” Specific. Honest. Respectful of people’s intelligence.

2. On workload

Leadership redistributes tasks and calls it a plan. That works once. It stops working when the team has already absorbed one round of cuts and is being asked to absorb more, with nothing left to deprioritize. At that point the honest answer isn’t a workload spreadsheet. It’s an acknowledgment that scope has to shrink permanently, and a real decision about which commitments the organization is willing to release. Leaders who skip that conversation and say “we’ll figure it out” lose the team within two quarters. I’ve seen it happen more times than I can count.

3. On retention

A manager sitting down with a flight-risk employee to say “we really value you” does almost nothing if that person already has a competing offer. Retention requires something real: an accelerated title, a clear path to the next compensation review, a project with actual visibility and upside. And sometimes it requires the harder conversation, an honest acknowledgment that the organization can’t currently match what’s on the table, and a genuine commitment to stay connected. A hollow retention conversation is often worse than none at all. It confirms what the person already suspects: that leadership doesn’t have anything concrete to offer.

4. On sustained visibility

Most communication plans run hard for the first month and quietly taper off once the crisis feels resolved. But the trust and productivity effects of a layoff don’t resolve in a month. Sustained, specific, candid communication over the following six months is what separates organizations that actually recover from ones that spend the next year trying to rebuild a team that never quite came back together.

What to do next

If your organization is planning a layoff, is in the middle of one, or has recently come through one, the risk to your remaining team is already in motion. The question is whether anyone is managing it.

The Layoff Landing is a fixed-scope, fixed-timeline engagement led by a senior consultant who has worked through this before. It’s built to move fast, because the window where intervention actually makes a difference is measured in weeks, not quarters.

Start with a free 20-minute Clarity Call, a working conversation with the consultant who would lead your engagement. No pitch. No obligation.
Or explore The C-List to see the full range of problems Cansulta helps organizations solve.