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Former Employees: Should You Rehire Them?

This year, 54 percent of large U.S. businesses that laid off employees in the past year want to rebuild their work forces, but some will have trouble finding the skilled workers they are looking for, according to a recent study by Accenture. Because of this gap, many employers will likely consider an alternate option to gain skilled workers: rehiring former employees.

Employees may be rehired for very different reasons. Maybe they were laid off due to a company’s financial situation, but not because they weren’t a valued employee. Or perhaps they were let go unfairly and a company realized its mistake. Maybe, just maybe, they were fired but fixed whatever caused them to be fired in the first place. Regardless of the reason, the question remains: Is this a positive trend or a recipe for disaster? Let’s examine.

Firing — and rehiring

Firings and rehirings can have a major effect on the employees in question. Since George Steinbrenner’s passing last week, many have commented about his tendency as a coach to treat employees rudely and fire them, then reconsider and hire them back soon after. Most wouldn’t argue that  many of his firings were impulsive. Steinbrenner, who reportedly made 20 managerial hirings and firings in 23 seasons, even admitted he was often unreasonable in his employee dealings.

Other organizations, like the Red Cross,  recently rehired two fired employees who complained about the heat during a blood drive, amid union talks. And an ex-employee who worked for the City of Fort Worth for years alleges she was wrongly fired after whistleblowing — what would happen if she was hired back?

What about rehiring laid off employees?

While it’s true that the decision to lay off employees is generally not a hot-headed game time decision a la Steinbrenner, layoffs still create unrest with laid off employees as well as remaining staff — and can leave a lingering bitterness in both camps toward company leadership. So what happens when you rehire employees post-layoffs?

Pros of rehiring former employees

Aside from the obvious — that rehiring employees is giving someone a job who needs to support themselves or a family, rehiring employees can have many other benefits.

Employee morale – If employees see that their employer is actively working to bring back employees, it can have a positive effect on morale — and it can bring people back together who formerly worked well as a team.

Training – Rehired employees understand the company culture, and employers don’t have to retrain them. Even if company structure has changed somewhat since they left, you’re likely looking at a quick brush-up versus a training overhaul.

New perspective — Time may actually have not just healed all wounds — but may have enabled both the person or people who let an employee go, and that employee, get away from a negative situation, gain some perspective, and learn from mistakes made. Even if the situation ended on a neutral or positive note, time away in which a former employee has had a chance to pursue other interests, hobbies, and skills may benefit not only them and their place in the organization, but also their employer, once he or she is brought back into the fold.

The HIRE Act — What it Means to You

If you’re an employer rehiring currently unemployed former employees — or an employer hiring any unemployed worker in general — you could benefit from a new tax incentive. One of the major benefits to employers who hire unemployed workers comes in the form of two new tax benefits that are part of the Hiring Incentives to Restore Employment (HIRE) Act. The two major parts of the act state:

  1. Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010.
  2. For each worker retained for at least a year, businesses may claim an additional general business tax credit, up to $1,000 per worker, when they file their 2011 income tax returns.

Find out more about the HIRE act and what it may mean for your business (video).

Cons of rehiring former employees

As much as rehiring a former employee can have positive effects, things can just as easily swing the other way — making a situation less than happy for rehired employees, employees who haven’t been let go, and company leadership.

Resentment – If things ended on a sour note, rehiring former employees can be complicated — and may not work out well in the long run. Even if an employer did everything they could to ease the stress of the situation, an employee may harbor resentment and bitter feelings, and those feelings may have grown stronger since they left the organization.

Current employee backlash — Employees who watched someone else leave and then come back may become jealous because a rehired employee is now getting work they were handling and returning “without paying their dues” as a new employee would. After all, remaining employees are often the ones left picking up the extra work when a company downsizes.

Short-term success – It’s important to keep in mind that even if an employee is willing to come back, they may only be accepting the job because they really need one (and are still looking for something better). This is where “onboarding” a rehired employee may help (see below).

If you’re going to rehire

If you do choose to rehire laid off employees, there are some things you can do to avoid the potential pitfalls listed above and ensure it’s as smooth a transition as possible.

Claudio Fernández-Aráoz, senior adviser at global executive search firm Egon Zehnder International, offers employers a few tips; namely, to clearly communicate to the rest of the company the reasons for hiring back a former employee; sufficiently brief a former employee about the company’s current situation and present very clear expectations; and to follow up, at least quarterly, with the returning employee to make sure he or she is adjusting well.

Would you rehire a former employee? What pros or cons would you add?