What does "layoff" mean in work?

A layoff refers to a job cut. It's the process of a company cutting jobs en masse. A layoff could be dozens of job losses or tens of thousands, depending on the size of the company and the economic challenges it's facing.

What happens if you are laid off?

Layoffs are often communicated through email or a Zoom meeting. If you are laid off, most companies will give you some kind of severance package, which typically includes several weeks' or months' worth of salary, and benefits like health insurance. Severance is intended to help those laid off bridge the gap between jobs, and it helps the company's own reputation by making it look like a responsible employer.

Why do companies lay off employees?

Companies typically lay off employees because they need to save money. That could be because they're facing sales declines, a recession, increasing competition, or investors demanding more profit.

Layoffs: What They Are and Why They Happen

What Are Layoffs?

By Jeremy Bowman – Updated Dec 7, 2025 at 3:03 AM EST

Key Points

Tech layoffs like those at Meta and Amazon reflect cost-cutting in response to economic shifts.
Investor reactions to layoffs can vary, often boosting stock prices due to perceived cost savings.
Understanding the specific reasons behind layoffs helps gauge a company's strategic direction.

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Young woman who just lost job carries a box of her personal belongings from office. — Image source: Getty Images.

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Bullish

Bullish means an investor believes a stock or the overall market will go higher.

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However, it's risky to interpret layoffs as a bullish signal for a stock, especially because layoffs occur for a variety of reasons. Although they might reflect a smart decision to improve profits at one company, they could be more representative of a business in decline at another company, in which case the news should be a signal to avoid a stock.

For example, a number of cryptocurrency companies, including Coinbase (COIN -5.00%), issued layoffs in 2022 and 2023 as cryptocurrency prices fell, and interest in trading digital currencies plunged. However, a recovery in crypto prices in 2024 lifted Coinbase stock.

Many of the tech companies that issued layoffs in 2022-24 did so from a position of strength, padding already wide profit margins in response to investor comments that their payrolls have become too bloated.

Frequently Asked Questions: Layoffs

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About the Author

Jeremy Bowman has been a contributing Motley Fool stock market analyst, covering technology, consumer goods, and macroeconomic trends since 2011. Before The Motley Fool, Jeremy was a newspaper reporter, restaurant manager, and English teacher abroad. He holds a bachelor’s degree in English from Colorado College and a master’s degree in business administration from American University. One of his Motley Fool headlines was briefly featured on Late Night with Stephen Colbert.

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Jeremy Bowman has positions in Amazon, Meta Platforms, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Walt Disney. The Motley Fool recommends Coinbase Global and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

What Are Layoffs?

Key Points

Bullish

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Frequently Asked Questions: Layoffs

What does "layoff" mean in work?

What happens if you are laid off?

Why do companies lay off employees?

What are layoffs, exactly?

Are layoffs good for investors?

One recent example of layoffs

Why do companies lay people off?

Related investing topics