How to rebuild trust after a layoff: Repairing psychological contracts

The uncertainty and upheaval caused by forced furloughs can significantly impact employee confidence and lead to a loss of perceived stability in their job security. This breakdown often results in lack of confidence, fatigue and reduced productivity, highlighting the importance of the recovery process.

The impact of furloughs on employee confidence is profound. Furloughs naturally bring with them an element of instability. According to a recent study, employees return from unpaid leave feeling uncertain about their job status and future income, their sense of fairness, commitment to the employer and trust in the company significantly decrease. If left unaddressed, this loss of trust can have lasting consequences. Here are some ways leaders can work toward restoring the psychological contract with their employees:

1. Talk about it: Regular updates and discussions about the reasons for introducing short-time working and the measures to resume work can help reduce uncertainty and build trust. Don't sugarcoat anything and be aware that it won't be “back to normal” when employees return – rebuilding trust takes time.

2. Emotional support: It is crucial to offer resources and enhanced benefits to help employees cope with the impact of furlough. This includes access to health services, counselling and employee assistance programmes. An important step is to hold team meetings to talk about the impact of furlough in a safe environment and provide a direct link to support through employee assistance programmes.

3. Holistic approaches: It's important to be aware that time off impacts on employees' personal lives and self-esteem. Implementing initiatives that encourage work-life balance while addressing the consequences of time off can help restore trust and increase engagement. People need to know they matter – take the time to communicate how important their role is and show employees they are valued.

4. HR efficiency and cultural alignment: Creating opportunities to reset company culture is critical to developing strategies that engage employees and meet their needs. For example, following a furlough period, introducing more flexible work-from-home options, offering professional workshops on financial services, enhancing employee recognition programs, and providing improved mental health resources through employee assistance programs can help restore trust.

HR must take a leadership role and recognize that adapting to a new normal will not happen overnight. Understanding that increasing productivity, morale and organizational engagement takes time and that HR practices must reflect this process. Approaching employees' return from a place of understanding rather than “policies over procedures” can help reshape the company culture to create a supportive atmosphere and improve employee morale.

It is incredibly important to take these measures, not only to overcome the immediate impact of the layoffs, but also to create a reliable and trustworthy organizational environment for the future.

Redesigning the psychological contract

The idea of ​​the psychological contract was first introduced in the 1960s. Organizational expert Denise Rousseau gave it a modern twist. She describes it as an agreement between an employee and their employer. Unlike a written employment contract that outlines duties and policies, this agreement focuses on elements of the work experience that increase motivation at work, such as freedom to perform assigned tasks, developing skills while working, interacting positively with coworkers, trusting that they will be paid correctly and on time, and feeling connected to something.

After a leave of absence, employees engage in fluctuating levels of confidence and performance fatigue, which are strongly influenced by their recovery experiences. Addressing these recovery processes is important to mitigate the impact and restore trust and the psychological contract within the organization.

Remember that all is not forgiven or forgotten when employees return to work. Openness, honesty, transparency and an understanding that rebuilding trust takes time are essential to rebuilding the psychological contract.

By implementing these strategies, organizations can effectively address the challenges of rebuilding trust after layoffs, resulting in increased employee engagement, productivity and overall success.