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Why do Layoffs Happen in December?

The end of the year is supposed to be filled with holiday cheer, celebrations with family and friends, decked-out halls, and stacked gifts under trimmed trees. But for many employees, December brings less tidings of comfort and joy, and more sad tidings of comfortless and joblessness.

Yes, the height of the holiday season, when Scrooge finally saw the light, is also peak season for layoffs. What a cliché buzzkill.

I know how it feels to get laid off; most founders have been there.

As an entrepreneur, you’re also often the one having to hand out the pink slips. Neither role is holly jolly.

So why do we see so many job cuts before the holidays and New Year? As with most things in business, the reasons usually boil down to money.

Ho Ho No: Annual Budget Cycles Means December Detachment

Big companies plan their budgets a year ahead on a calendar cycle.

For example, in January they finalize next year’s budget, which sets headcount and spending levels for each group. Managers divide their budget by 12 and get a monthly spend quota.

Come December, lots of managers are way over budget. The money that was supposed to last till January is gone. Oops! So they cut the largest expense, people, to meet the month’s numbers.

It can seem pretty Scroogey, even when it’s not personal. Getting “budgeted” out happens most often in mature businesses, not hot startups. Venture-backed startups rarely stick to yearly budgets with layoff cycles. They’re focused on growth, spending every dollar they have. Layoffs come in big chunks if they run out of cash.

Mature companies also have more holiday absenteeism. Fewer people on hand means managers can terminate more easily without work slowing. Cynical, but true!

So in corporate jobs, December is the cruelest month. You survived annual layoffs in January through November (especially September after summer vacations). But budget Scrooges ruin the holiday spirit at the last minute. Suddenly you’re sitting at home reviewing severance papers instead of quarterly results.

Restructuring And Write-Offs Get Wrapped Up By Year-End

Public companies also often announce major restructuring plans in December. They lay off hundreds or thousands of people, then wrap up the whole messy “reorganization” by New Year’s.

This lets them maximize quarterly earnings. How? They get to write off the big one-time costs of layoffs in the current year, rather than dragging charges into the new year. Less charges means more EPS. Investors cheer.

The terminated employees don’t cheer so much. But shareholders get a nice tax-deductible layoff-wrapped present, tied up with a bow. The stock price gets a Santa Claus rally.

Sometimes the shares bounce so much, that executives qualify for higher bonuses too. Funny how that works out.

Restructuring layoffs aren’t always purely financial games though. Companies also announce them in December because…

New Year Symbolism: “Out With The Old…”

January 1st is a potent psychological milestone. We make resolutions to improve our lives. CEOs like to clean house too and set things right going into a new year.

Out with the old, in with the new! Except the “old” are often loyal employees. Oh well.

So rather than let bad trends continue into the new year, executives lay off en masse to proverbially “flip the calendar”. Then talk about how they’re turning over a new leaf for 2023. The year 2022 was just bad apples in a few barrels. 2023 will bring a shiny new harvest of…yada yada.

But doesn’t canning thousands of people right before Christmas seem a bit inhumane?

Timing Is (Almost) Everything

Well yeah, the timing sucks. But executives will say there’s never a good time for layoffs. Rip off the band-aid fast, that’s the philosophy.

However, German law bans holiday season layoffs for being heartless. US law has no protections though. So bah humbug to any inopportune firings.

The truth is holiday layoffs often aren’t more common numerically. They just get more publicity for seeming so cruelly-timed. January is the biggest month statistically. But December draws more attention to the pain.

Add in the other usual corporate excuses like:

  • We’re offering severance packages
  • This clears payroll so we can hire better later
  • They can start job searching with a fresh new year!
  • Or enjoy Christmas off (unpaid except severance)!

Somehow it always sounds hollow. Especially having lived through layoffs myself.

The reality is it’s both symbolically and financially optimal for companies to cut staff going into year-end. The statistics support it too. But behind the numbers are real suffering families during the season of giving.

Yet perhaps this seeming inhumanity hides a silver lining…

Layoff Lemonade: Making The Best of Getting Fired

After you’re done cursing the CEO’s bad timing, try seeing unexpected time off as a gift instead.

Yes, it will first suck to:

  • Worry about money
  • Explain things to your family
  • Send out resumes during the holidays
  • Lose your work friends and identity

But after cooling down, why not take advantage of the unique opportunity for reflection and renewal?

People never expect to get laid off, especially at year-end. It burns social capital to ask for a vacation. But now you’ve been granted one, paid or not!

So rather than point a bitter finger at your employer, redirect that energy into yourself. Take a step back and get perspective.

  • Start next year’s resolutions early
  • Take that trip you put off
  • Help out your community
  • Learn new skills
  • Spend time with loved ones

Or just nap, read books and stream shows guilt-free!

Sometimes getting laid off, while horrible financially, can shock you into remembering what really matters: health, family, relationships, and personal growth.

So if you do get the corporate Scrooge treatment, see it as an opportunity handed to you. Take back control and write your own redemption story.

Create Your Own Christmas Miracle

When I got laid off years back, it first felt like the floor fell out. Rationally I knew it wasn’t personal, but my self-worth felt on trial.

Losing your job shakes your whole identity. However, I decided to embrace getting let go as a chance for a fresh start. After the initial shock and anger, I got excited to take a vacation and just experiment without a safety net.

So remember, when handed sour lemons in December, you can still make sweet lemonade. An expected catastrophe might contain unexpected opportunity. New shoots often sprout after forests burn down. Destruction clears space for creation.

Every setback prepares you for a future comeback, if you bend instead of break. As Victor Frankl wrote:

“When we are no longer able to change a situation, we are challenged to change ourselves.”

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