Workplace Culture After Layoffs: Engagement and Morale

Over the past year, headlines about layoffs have become alarmingly routine. From Big Tech to Main Street, no industry has been immune. And while the coverage often focuses on questions of “who” and “how many,” the deeper question is: what happens next?

The data shows the damage extends far beyond those who receive the call. Among employees at organizations that have undergone recent layoffs, 38% report disrupted sleep, 59% say they're carrying additional workload due to understaffing, and engagement drops to 44% among workers where layoffs have occurred — compared to 51% overall.

To understand how the most recent wave of layoffs is shaping the workforce, Perceptyx’s research team surveyed more than 5,400 employees across the U.S. The results show a workforce in flux, grappling with uncertainty, adjusting to new realities, and recalibrating what they want next. Here’s what we learned.

Layoffs are more common than you think, and the worry runs deep

Layoffs typically go beyond a single company, affecting individuals and organizations throughout a troubled economy:

• Nearly 1 in 3 workers say they’ve been laid off at some point in their careers.

• 1 in 6 workers say it’s happened within the past three months alone.

• For those who haven’t been impacted directly, many are still on edge: 33% are at least moderately worried about being laid off, and 28% admit they’re not at all prepared if it were to happen.

What’s more, layoffs are rarely happening quietly.

• 28% of workers say there are rumors of layoffs at their organization,

• 22% say they’ve received official communications about potential cuts, and

• 24% have already seen them happen within their organization.

The fear isn’t just hypothetical; it’s present, it’s growing, and it’s changing how people approach their work.

Layoffs spark job hunting, even for those who stay

It might seem obvious that people who’ve been laid off are on the job hunt, but they’re not alone. Layoffs appear to have a ripple effect that drives job-seeking behavior across the board.

• Overall, 61% of employees are currently looking for a new job.

• Among those who’ve experienced a layoff before, that number jumps to 74% (versus 55% of those who have never been laid off).

• When layoffs or restructuring happen at a company, 58% of employees say they’re more likely to look elsewhere, even if their own job wasn’t affected.

Workers report strong confidence despite the pressure: nearly 6 in 10 say it's a good time to find a new job in their field, and more than 4 in 5 report equal or greater confidence than a year ago that they could find a new role. Employees themselves are surprisingly resilient and feel confident in their abilities. Nearly 6 in 10 think it's a good time to find a new job in their field, and more than 4 in 5 report the same or more confidence as a year ago that they could easily find a job if they wanted one.

Engagement declines, especially where layoffs are happening

It's no surprise that uncertainty takes a toll on engagement. But the data shows just how much layoffs can erode employee connection and motivation. Research on workplace culture consistently identifies psychological safety and a sense of belonging as foundations of engagement. When employees feel afraid to speak up or no longer feel like part of a team, engagement drops. Layoffs can damage both of these foundations at once.

While over half (51%) of all workers say they’re fully engaged, that drops to:

• 46% among those who’ve been laid off in the past,

• 45% at organizations that have recently undergone layoffs, and

• 44% among those at organizations where there are rumors about future layoffs.

Rumors alone reduce full engagement by 7 percentage points. Workers who report layoff rumors at their organization are also more likely to begin job searching and less likely to feel committed to their current role.

Beyond job security and engagement, layoffs leave a mark on employees’ emotional and psychological health. Those who are employed by organizations that have recently undergone restructuring or layoffs report a new onset of a variety of negative health outcomes.

• 38% say their sleep has been disrupted,

• 37% report periods of anxiety,

• 35% say they’ve felt more down or in a sad mood,

• 26% admit they’ve had a shorter temper than usual, and

• 22% report binge drinking or drug use.

And the workplace dynamics shift too: more than half of workers (53%) say layoffs have made it harder to maintain friendships with co-workers, and 59% say they’re carrying extra responsibilities because their teams are understaffed.

In other words, the effects of a layoff don't stop at the exit interview. They linger in behavior, in morale, and in the day-to-day work experience. Over time, these shifts can reshape workplace culture itself, lowering productivity and accelerating turnover well beyond the initial round of cuts.

Transparency helps, but communication gaps remain

The way an organization handles layoffs can make a big difference. Employees were more forgiving and more confident when leadership was open, communicative, and respectful during the process. But many organizations fall short.

• Just 54% of employees said their organization communicated openly about layoffs,

• 53% say they don’t understand why the layoffs happened at all, and

• Support wasn’t consistent: no single resource (e.g., severance, extended health insurance, or job search help) was reported by more than 36% of employees (severance packages).

However, when managers and leaders do their best to communicate openly, it can be a strategy to strengthen the connection with those left behind. Of those 54% whose organizations communicated openly, a full 61% were highly engaged — a figure 3x that of those who felt communication wasn't open and honest. This matters even more given that most employees already feel disconnected from their organization's cultural values. Layoffs are a high-stakes moment when managers can either reinforce what the organization stands for or confirm employees' doubts.

What layoffs mean for leaders, workers, and organizational culture

Layoffs affect more than headcount. They reshape relationships, identity, and trust across an organization. But they also create a window for change.

For workers, layoffs often force a moment of reflection: a reconsideration of what they want from work and what they're willing to accept going forward. As the data above shows, the majority are already acting on those questions by looking for new roles.

For leaders, layoffs are a test of values and communication. How you handle these moments leaves a lasting impression on both those who go and those who stay. Organizations with strong cultures outperform their peers precisely because they invest in open communication, mutual respect, and employee growth, especially during disruption.

For organizations at large, the current climate demands resilience built on clarity, consistency, and genuine care for the people behind the job titles.

How organizations can support employees before, during, and after layoffs

Even when layoffs are necessary, the way they’re handled can soften the blow and preserve trust. Based on our findings, here are five strategies organizations can use to support employees before, during, and after workforce changes.

1. Be Proactive, Not Just Reactive, in Communication: Share what you can, early and often. Employees who feel informed are less likely to fill the silence with fear or misinformation. Communicate the why behind decisions, what comes next, and how employees will be supported. Transparency builds trust, even in hard times.

2. Prioritize Employee Well-Being: Layoffs don’t just create job insecurity, they impact mental health, sleep, and emotional resilience. Offer well-being resources, normalize conversations around stress, and train managers to recognize when employees may need extra support. Small gestures of care can go a long way.

3. Acknowledge the Toll on Survivors: The people who stay often carry survivor’s guilt, extra work, and uncertainty about their own future. As the data shows, 53% say layoffs have made it harder to maintain friendships at work, which directly erodes the sense of belonging that drives engagement. Recognize their challenges, involve them in rebuilding efforts, and create intentional opportunities for teams to reconnect. Don’t just move forward, move forward together.

4. Invest in Career Development: In times of uncertainty, employees want to know they still have a future at the company. Highlight internal mobility, learning opportunities, and growth paths, even if budgets are tight. When people see a path forward, they’re more likely to stay engaged and committed.

5. Create Meaningful Opportunities for Listening and Action: Invite feedback, listen to concerns, and act on what you hear. Employees are more likely to stay resilient when they feel their voice matters. Whether through surveys, focus groups, or manager check-ins, make listening a continuous, intentional practice — not just a one-time event.

Layoffs may be a business reality, but empathy, communication, and care are leadership choices. Organizations that invest in their people during tough moments build the loyalty and trust neededto thrive long after disruption passes.

Frequently asked questions

What is workplace culture?

Workplace culture is the shared attitudes, values, and behaviors that shape how people work together every day. It includes how leaders communicate, how teams handle conflict, and how employees treat one another. Culture directly affects engagement, retention, and performance — and layoffs can shift it quickly by increasing fear and reducing trust among the people who remain.

How do layoffs affect workplace culture?

Layoffs fundamentally reshape the employee experience by eroding trust, damaging psychological safety, and disrupting the social fabric that holds teams together. When organizations cut staff, the impact ripples through every layer of culture — from how people communicate to whether they feel safe speaking up. Employees who remain often experience survivor's guilt, increased workloads, and uncertainty about their own future, all of which undermine the sense of belonging that drives engagement. The cultural damage extends beyond immediate stress responses to affect long-term patterns of collaboration, innovation, and retention.

Why do employees who survive layoffs start looking for new jobs?

Layoffs signal instability, and employees respond by protecting themselves. When workers see colleagues let go, they begin questioning their own job security and whether the organization values their contributions. The added workload from understaffing, combined with the emotional toll of losing teammates, creates a perfect storm that pushes people toward the exit. Our research shows that 58% of employees become more likely to seek new opportunities after witnessing layoffs at their organization, even when their own roles weren't affected. This "survivor flight risk" represents one of the hidden costs of workforce reductions that many leaders fail to anticipate.

How long does it take for workplace culture to recover after layoffs?

Culture recovery timelines vary widely depending on how organizations handle the transition and what actions they take afterward. Companies that communicate transparently, acknowledge the toll on remaining employees, and invest in rebuilding trust can begin seeing engagement improvements within months. However, organizations that treat layoffs as a one-time event without addressing the underlying cultural damage may struggle for years. The key factor is whether leadership demonstrates through consistent action that they value the people who stayed. Without intentional culture-building efforts, the negative effects can become permanent features of the work environment.

What role do managers play in protecting culture during layoffs?

Managers serve as the critical bridge between organizational decisions and employee experience during workforce reductions. They're often the ones delivering difficult news, answering questions, and helping teams navigate the aftermath. When managers receive proper training and support, they can buffer some of the cultural damage by maintaining open communication, showing empathy, and helping employees process their emotions. However, managers themselves are also affected by layoffs — they may be grieving the loss of team members while carrying their own uncertainty. Organizations that equip managers with resources, talking points, and emotional support enable them to be culture carriers rather than casualties of the disruption.

What is a toxic workplace culture?

A toxic workplace culture is one where negativity becomes part of everyday interactions — reducing trust, raising stress, and hurting performance. Common signs include poor communication, employees who feel unsafe speaking up, and unusually high turnover. Layoffs can accelerate these patterns when organizations handle them poorly. Perceptyx research found that 53% of employees at companies that went through layoffs didn't understand why the cuts happened. Without honest communication, employees fill the silence with fear and frustration, which are conditions that erode culture fast. Employees at these organizations reported higher rates of anxiety, mood disruption, shorter tempers, and difficulty maintaining workplace relationships.

What does healthy workplace culture look like after layoffs?

Healthy post-layoff culture starts with honest, proactive communication. Perceptyx research found that when organizations communicated openly during layoffs, 61% of employees were highly engaged, nearly 3x the rate seen at organizations where communication wasn't transparent. Beyond communication, organizations that rebuild culture effectively tend to:

• Acknowledge the extra workload and stress on employees who remain

• Offer well-being resources and normalize conversations about stress

• Show employees a clear path for career growth, even when budgets are limited

• Create regular, structured ways for employees to share feedback — and act on what they hear

It almost goes without saying that culture doesn't recover on its own. It takes consistent leadership behavior rather than mere policy changes.