Why layoffs happen in December, and how to handle them compassionately | TechCrunch

The holiday season usually sees nearly 40% of Americans going into debt to pay for presents and other holiday-related expenses. It’s understandable, then, that it’s even more heartbreaking than usual to be laid off in December.

Many companies avoid staff cuts on purpose in these late months, either out of charity, or out of concern for their public image. Still, it happens every year, and as a startup employee, you’re at higher risk than most of being laid off.

The truth is, startup jobs pay well partly because you’re taking a risk. The company may be successful, but it may also need to adjust course quickly. Some founders hold off as long as they can before deciding to do layoffs, but there are a number of factors that makes December a risky month in general.

Let’s figure out why, and what to do if it does look like you as a founder need to lay off staff in the last month of the year.

The final quarter looms

The fourth quarter is more than just another three-month period on the calendar. It’s a critical juncture that can make or break a company’s financial standing, shape investor sentiment and set the tone for the following year. It’s crucial to perform well financially during Q4 because it is the last opportunity for a company to impact its annual results positively.

The successes, failures, and unexpected turns of the previous three quarters all culminate in Q4. For businesses struggling to meet annual targets, Q4 is the final chance to turn the ship around. Conversely, companies having a strong year can solidify their status, push beyond their goals and possibly set new records.

Investor expectations add another layer of pressure. For many investors, Q4 results serve as a barometer of a company’s overall health and future prospects. Investors watch Q4 performance closely to see if their investments have paid off or if it’s time to reconsider their portfolio. Strong Q4 results can boost investor confidence, attract potential investors and increase a company’s share price. On the other hand, poor performance can erode investor trust and lead to a decline in stock value.

In addition, many businesses’ Q4 falls during the holiday season, especially in the retail sector. This period often brings higher sales volumes, making it a pivotal time for companies to enhance their financial performance — Black Friday came to be called so because for many retailers, the Thanksgiving weekend and the ensuing shopping spree would push their bottom line out of the red (losses) and into the black (profits).

But for a company that has had a lackluster Q4, there’s a strong motivation to make some adjustments (read: cost cuts). That’s where layoffs come in.