Neuro-Psych Insights on Layoffs: Understanding the Impact and Building Resilience
“Have you heard about the TCS layoffs?” has been a refrain we have heard several times this quarter. While the layoff is just 2% of the workforce, it will impact 12,000 people at TCS. Intel is going to cut double that number – 24,000 this year! “We are going to start using AI to make our workflow more efficient” is a cue these days that triggers lay off fears.
Layoffs aren’t just organizational decisions; they’re deeply human events. The damage they inflict extends far beyond the immediate loss of employment. The threat of layoff can impair neural functioning such that stress hormones like cortisol spike, interfering with critical brain regions such as the prefrontal cortex and hippocampus, affecting memory, decision- making, and emotional regulation.
Among younger men, the deterioration of mental health gains momentum with longer unemployment histories (Liina Junna, Heta Moustgaard, and Pekka Martikainen, 2022). In high-stress workplace contexts, this neurological impairment undermines clarity, resilience, and recovery. At the same time, layoffs are a reality. Companies are for-profit organizations and can make tough calls to ensure financial well-being of the institution. All employees have to be prepared for this reality, either in downturns or in the context of disruptive shifts like the AI. Also, while the impact of layoffs is the biggest on the people losing their job and their families, it also takes a toll on people that survive the catastrophe.
The Psychological Fallout – Effects of Layoff
“Survivor’s Syndrome” and Guilt:
The long-term impact on survivors of organizational downsizing includes a decrease in morale, trust, and thus loyalty to the organization. An employee and employer have a written agreement with the signing of hiring paperwork but also have an unwritten/unspoken agreement (contract) that involves an employee operating under the assumption that the organization has its best interest at heart. Violation of this tacit agreement can lead to demoralization, decreased productivity, loss of trust, decreased organizational citizenship behaviour, lower organizational commitment, and increased turnover rates. (Langster, Holly J. DNP, FNP-C, HCA, RN, CENP; Cutrer, Shelby BS, 2021)
“Anxiety & Distrust”:
Fear of being next fosters chronic, low-level anxiety. Studies show that in companies with recent layoffs, around 65% of survivors fear losing their jobs, compared to only 24% in stable firms. Combined with reduced trust in leadership, this often leads to presenteeism, where employees show up physically but are mentally disengaged (Laker, 2024)
“Burnout, Absenteeism & Turnover”:
Layoffs increase workload for survivors, raising burnout risks and incidents of disengagement. The study reports that 40% of survivors are actively looking for new jobs, and 68% more likely to leave the organization post-layoff. (Langster, Holly J. DNP, FNP- C, HCA, RN, CENP; Cutrer, Shelby BS, 2021)
“Physical & Mental Health Decline”:
Layoffs correlate with significant health downfalls. Survivors report sleep disturbances, elevated blood pressure, and impaired immune function. Men have a significant increase in depression resulting from layoffs. This result is consistent with the conclusions of Miller and Hoppe (1994), who reported higher depression among men who were selected for termination
than among those whose jobs were eliminated. (Jennie E. Brand, Becca R. Levy, William T. Gallo, 2008).
Given the reality that layoffs are, being prepared with a constructive response to the layoffs as an individual employee, as a manager, as HR, and as leaders is imperative. Here are some neuroscience-based tools you can use.
Neuroscience to the Rescue: Coping and Restoration
Expressive Writing: 5 Minutes That Matter
A lab study found that writing about one’s emotional reaction to a layoff notice lowered physiological stress more effectively before planning job-search strategies. This highlights the power of emotion-focused interventions, especially immediately after traumatic news. According to Tahira M. Probst and Lixin Jiang (2016), the grieving stage helps the layoff victim cope with the situation before transitioning to the next career goals.
Social Buffering: The Oxytocin Effect
Strong social support helps dampen stress responses. Oxytocin and social bonding inhibit activation of stress pathways in the brain. Facilitating peer and managerial support post-layoff isn’t an added convenience but it’s a neurological necessity.
Build Capacity for Growth
Structured training and development ease anxiety and boost engagement. Gallup data shows trained employees are 21% more productive. Studies found turnover drops by 34% when employees see investment in their future.
Invest in Support and Well-Being
Understand Dr David Rock’s SCARF model: Understanding the emotional triggers for people during a situation like layoff can guide managers, leaders and HR professionals to find ways to counsel them more effectively. https://modelthinkers.com/mental-model/scarf-model
Express emotional support first: Encourage emotional processing through writing or counselling before transitioning to job-search training.
Hold structured check-ins: Regular one-on-ones can significantly lower stress and job insecurity among survivors.
Skill-building and growth pathways fortify meaning and engagement during turbulence.
Conclusion
Layoffs are not just a business decision but a profoundly human one with significant psychological and neurological consequences. For laid-off employees, the experience can lead to severe mental health issues, with a notable increase in conditions like depression. The remaining employees, or “survivors,” often grapple with guilt, anxiety, and a fundamental loss of trust in their organization. This can lead to decreased morale, productivity, and loyalty, ultimately harming the company.
Neuroscientific strategies for coping and recovery can help with interventions like expressive writing, which can help individuals process emotional trauma, while social support facilitated by oxytocin serves as a neurological buffer against stress. Furthermore, a company’s investment in the remaining employees through structured training and development can rebuild trust, enhance engagement, and reduce turnover.
Organizations have a clear opportunity to mitigate harm and foster a resilient workplace by addressing the emotional and neurological well-being of their employees.
References
- American Psychological Association. (2023, April 5). Managing mental health when you get laid off. Verywell Mind. https://www.verywellmind.com/managing-mental-health-when-you-get-laid-off-7100701
- Probst, T. M., & Jiang, L. (2016). Mitigating physiological responses to layoff threat: An experimental test of the efficacy of two coping interventions. International Journal of Environmental Research and Public Health, 13(3), 338. https://doi.org/10.3390/ijerph13030338
- Langster, H. J. D., & Cutrer, S. (2021). A scoping review of the impact of downsizing on survivors. JONA: The Journal of Nursing Administration, 51(6), 291–297. JONA: The Journal of Nursing Administration
- Laker, B. (2024, August 31). How recession layoffs hurt trust and what to do about it. Psychology Today. https://www.psychologytoday.com/us/blog/mindful-leadership/202408/how-recession-layoffs-hurt-trust-and-what-to-do-about-it
- Jin, R. L., Shah, C. P., & Svoboda, T. J. (1995). The impact of unemployment on health: A review of the evidence. Canadian Medical Association Journal, 153(5), 529–540. The impact of unemployment on health: a review of the evidence – PMC
- Cobb, S. (1974). Physiologic changes in men whose jobs were abolished. Journal of Psychosomatic Research, 18(4), 245–258. Physiologic changes in men whose jobs were abolished – ScienceDirect
- Cottington, E. M., Matthews, K. A., Talbott, E., & Kuller, L. H. (1986). Occupational stress, suppressed anger, and hypertension. Psychosomatic Medicine, 48(3–4), 249–260. Occupational stress, suppressed anger, and hypertension – PubMed
- Dooley, D., Rook, K. S., & Catalano, R. (1987). Job and non-job stressors and their moderators. Journal of Occupational Psychology, 60(2), 115–132. Job and non‐job stressors and their moderators – DOOLEY – 1987 – Journal of Occupational Psychology – Wiley Online Library
- Kuhnert, K. W., Sims, R. R., & Lahey, M. A. (1989). The relationship between job security and employee health. Group & Organization Management, 14(4), 399–410. https://doi.org/10.1177/105960118901400404
- ModelThinkers. (2025, August 21). SCARF model. ModelThinkers. https://modelthinkers.com/mental-model/scarf-model
- Janse, B. (2023). SCARF model (Rock). Toolshero. https://www.toolshero.com/management/scarf-model-david-rock/
- Gallup. (2024). State of the global workplace: Understanding employees, informing leaders. Gallup. https://www.gallup.com/workplace/349484/state-of-the-global-workplace.aspx
- Sicorello, M., Dieckmann, L., Moser, D., Lux, V., Luhmann, M., Schlotz, W., & Kumsta, R. (2020). Oxytocin and the stress buffering effect of social company: A genetic study in daily life. Social Cognitive and Affective Neuroscience, 15(3), 293–301. https://doi.org/10.1093/scan/nsaa034