Key Differences Between Laid Off vs Fired: A 2025 Guide

Being terminated from a job is bad news for workers as it indicates final paycheck. The job loss leaves employees with limited financial capability and a pause in professional pursuits. On a more positive note, termination can also mean new opportunities for a better career trajectory.

The first step in knowing how to continue your job search and land a new role after termination is to know if you were laid off vs fired.

There is an important difference between "laid off" vs "fired" in the corporate world, and this article will guide you through their meanings, respective unemployment benefits, and how to answer being laid off or fired in an interview with potential employers.

What does "laid off" mean?

When an employee is laid off, it means that the employer or company has ended the employment due to conditions beyond the employee's control. As a form of involuntary termination, employers lay off the workforce during economic crises or structural changes in the organization.

Some of the reasons companies lay off employees include the need for fewer personnel due to reduced workload, cutting costs due to insufficient funding, changes in business needs and objectives, and the acquisition or merger of the company.

A layoff does not deter an employee's ability to find new jobs, since being laid off does not reflect poor performance at work, and the process is a regular part of the business industry.

What does "fired" mean?

When an employee is fired, it means that the employer has ended the employment due to company rule violations and job performance issues, such as poor attendance and misconduct. This is considered a voluntary termination, since the reasons for being fired are deliberate choices made by the employee.

Contrary to a layoff, being fired harms an employee's chances of finding new roles, as this indicates committing major offenses in the previous company, which can repel future employment.

Laid off vs fired unemployment benefits

Due to a sudden job loss, laid-off employees are eligible for unemployment compensation, like severance pay, which provides financial support while finding new job roles, and outplacement services, which help departing employees pair up with coaches to guide them in writing resumes and support the transition.

Unlike laid-off employees, fired employees are rarely entitled to severance packages or outplacement services, but they can sign up for benefits, like COBRA health insurance coverage if eligible.

How to explain being laid off in an interview

When searching for a new job after being laid off, knowing how to respond to "Why did you leave your previous job?" can give the recruiter a positive perspective on your involvement with your past employer. Here is how to explain being laid off in a job interview:

1. Give a concise and unemotional response. Focus on why the company had to terminate employees due to factors outside of your control, such as cutting costs or restructuring of the business.
2. Speak in positive terms about your past employer and show that you understand their layoff decisions. This helps maintain your professionalism and composure among the hiring managers.
3. Highlight your skills, knowledge, and certifications, giving the impression that being laid off does not define your competencies and abilities to deliver work requirements of the prospective employer.

Here is an example:

"My previous company underwent a major restructuring in its business objectives due to the acquisition of new owners. This decision was made due to the current market and economic conditions, and my team had to be terminated. Despite these changes, I have gained skills and certifications over my 3-year experience in the company, specifically in [insert skills and certifications]. I believe that my expertise and knowledge are aligned with your organizational needs, and I look forward to contributing to your team."

How to explain being fired in an interview

Explaining reasons for being fired can be more complicated than being laid off, as it requires more honesty, risking the chance of being hired in a new company. However, there is an effective way to navigate this through growth and positivity:

1. Be transparent about your termination, why it happened, and your shortcomings in the previous role. Your accountability and awareness are also important qualities. Owning up to your professional mistakes means you know where to improve.
2. Avoid making excuses, calling wrongful termination, or blaming employers or co-workers. Use softer language instead of "I was fired," such as "We parted ways" or "I was let go."
3. Focus on the lessons you have learned and the improvements you ventured on after being terminated. Highlight growth through gaining new skills or a better understanding of important processes.
4. Ensure that hiring managers understand how your growth and learning experiences from mistakes make you a better fit for the role.

Here is an example:

"We parted ways with my previous company since the position was not a good match with my strengths and weaknesses. I had to gain a better understanding of the social demands of my work, and I was let go. I have since learned to improve my communication style, be more adaptable to feedback, and collaborate more with the team. I am excited to apply these learnings in your company. I believe the open role you have matches my strengths, and I can't wait to contribute to your team."

Key takeaways: laid off vs fired

Now that we have a deeper understanding of the difference between laid off vs fired, here is a rundown of the key takeaways we learned:

• Being laid off means the company terminates employment due to factors outside of an employee's control, such as reduced workload, cut costs, restructuring of business, and acquisition of the company.
• Being fired means the company terminates employment due to the employee's violation of company policies and performance issues.
• Laid-off employees are entitled to unemployment benefits, like severance pay and outplacement services, while fired employees are usually not given the same packages unless they sign up for benefits, like COBRA health insurance coverage if eligible.

FAQs

Here are some frequently asked questions about the difference between laid off vs fired:

Is it better to say you were laid off or fired?

Whether you were laid off or fired, it is better to be honest in interviews about the reason for your termination from the previous job.

If you were laid off, focus on the termination as a regular process in the business industry, and that you still possess the abilities for the new role you are applying for. If you were fired, be accountable for your professional mistakes, highlight your improvement in previously lacking areas, and assure future employers that your learning experiences make you fit for the role.

Do you get severance if laid off?

Yes, you can get severance pay if laid off. According to the US Department of Labor, severance pay is granted to terminated employees based on the length of employment and the agreement between the employee and the employer.

The Fair Labor Standards Act (FLSA) does not require severance pay, but employees can be assisted through the Employee Benefits Security Administration (EBSA) if they didn't receive severance benefits under employer-sponsored plans.

Can laid off employees be rehired?

Yes, laid-off employees can be rehired. There are no laws that prohibit the rehiring of employees terminated due to layoffs.

Why do companies lay off instead of fire?

Companies lay off instead of firing employees due to various reasons, such as cutting costs, restructuring of business, and reduced workload. Some companies also use layoffs as an excuse to fire employees. This is to maintain company morale and avoid wrongful termination claims, severance, and hurt employees' feelings.

Does being laid off look bad on a resume?

Being laid off does not necessarily look bad on a resume since layoffs are a regular part of the evolution of job markets and the business industry. Be honest on your resume and application, and focus on how you handled the situation, as good companies prefer skills and experience.