During the busy holiday season, all sorts of small businesses take on extra staff. Whether you run a store or a service business, demand can dramatically increase through December and well into January as customers spend gift cards or use cash they received as a present.

In most cases, though, the good times don't roll on forever. Eventually, demand will lessen and you may find yourself with more labor than you need. That may be something you expected. It may even be something you communicated as a likely possibility to your employees. And it's a situation you need to deal with sooner rather than later.

A woman raises her finger at a man sitting across the desk from her.

Even if an employee gets mad, you need to handle layoffs professionally. Image source: Getty Images.

Analyze and get it done

Putting off needed layoffs, whether temporary or permanent ones, costs you money. You may not know exactly when the holiday rush will end -- though it probably has already -- but you almost certainly know that it will.

Analyze how much staff you need and make the appropriate adjustments. It's possible that a strong holiday season increased your overall business. If that's true, then the cuts may not have to take you fully back to pre-holiday levels, but it's important that your staff, hours, and expenses match the amount of business you expect to do.

Be honest and direct

During my days running a large toy store, we hired a lot of extra workers for the holiday season, and many part-timers got more hours than they normally did. We explained the situation before the season -- usually in one-on-one talks with each person. Even so, when the season ended, much of our seasonal staff hoped to stay on, and many part-timers wanted to keep the extra hours.

I was usually able to find a few shifts for the best of the best, to keep them in the fold for smaller seasonal spikes such as Easter and school vacation time. In most cases, however, I had to deliver bad news, and the best way to do that is bluntly and honestly.

If someone did a good job and I'd want them back if an opening occurred, I'd let the person know. When that wasn't true and I wouldn't be interested in hiring the person again, I'd also say that.

Manage to succeed, not to please

In a small business, it's normal to get to know your employees very well. That can make it hard to let people go when your business volume no longer supports keeping them on board.

You have to ignore your compassion and focus on running your business the right way. That doesn't mean you don't handle communicating the layoff compassionately. It does, however, mean you have to make the right decision for the long-term health of the company.

Talk with each worker and let each one know the situation. Offer to be a reference for the worker's next job or even to help him or her find something, if those are things you can do and are comfortable doing. Be as kind as you can while also being direct and making the best choice possible for the current needs of your small business.

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