Layoffs and salaries are linked in three different ways: layoffs cut pay sharply and for years for many of the people who lose their jobs, they often freeze or shrink raise budgets for the people who stay, and they do not automatically push down the salaries companies advertise. Who gets hurt, and how much, depends on how tight the labour market is, how specific your skills are and how fast you get back into a comparable job.
This guide brings together what research on displaced workers shows, what layoffs do to survivors, TalentUp data on whether advertised tech salaries fell during the recent layoff waves, statutory severance rules in five countries and practical steps for candidates and employers.
Key takeaways
- The biggest pay effect of a layoff falls on the person laid off: US research puts the average long-run loss at 1.4 to 2.8 years of earnings, depending on unemployment when the layoff happens.
- Losses come mainly from a lower hourly wage in the next job, not just time out of work, and they recover slowly.
- People who stay usually keep their base salary, but often face frozen raises, more work and lower security.
- In TalentUp’s like-for-like US tech sample, the median advertised salary rose 6.1% between Jan–Sep 2025 and Jan–Sep 2026; it did not fall.
- In August 2026, the US layoffs and discharges rate was 1.0%, little changed on the month (BLS JOLTS).
- Severance is statutory in Spain, France and the UK, optional by formula in Germany and not required by US federal law.
Do Layoffs Lower Salaries? The Short Answer
It depends on whose salary you look at.
| Group |
Main pay effect |
How strong the evidence is |
| Workers who are laid off |
Lower earnings for years: time out of work plus a lower wage in the next job |
Strong: large studies with administrative data |
| Workers who stay |
Raise freezes, smaller budgets, more work per person |
Moderate: mostly surveys of survivors |
| The job market |
Fewer openings in affected functions; advertised pay for the roles still hired does not automatically fall |
Mixed: depends on the sector, country and who is still hiring |
Companies usually cut headcount instead of cutting everyone’s pay: fewer people at the same salary rather than everyone at a lower salary. That is why a layoff wave can coexist with stable or rising advertised salaries for the roles companies still need, as the TalentUp data below shows.
The official numbers matter too. In the United States, the BLS Job Openings and Labor Turnover Survey (JOLTS) reported 1.6 million layoffs and discharges in August 2026, a rate of 1.0%, with little change over the month and in every industry. In the same release, hires were 5.2 million (3.3%), quits 3.1 million (1.9%) and job openings 7.1 million (4.3%). Headlines about individual companies can make layoffs look more widespread than economy-wide data suggest, but for the people affected the cost is real and long-lasting.
What Happens to Your Salary If You Are Laid Off
This is where the evidence is clearest. Two of the most cited studies use administrative earnings records rather than surveys:
| Study |
Data |
Main finding on pay |
| Davis & von Wachter (2011), Brookings Papers on Economic Activity |
US Social Security records, men under 50 with 3+ years of tenure |
Present-value earnings loss of about 1.4 years of pre-layoff earnings when unemployment is below 6%, and 2.8 years when it is above 8% (20 years, 5% discount rate); about $77,557 in 2000 dollars on average |
| Lachowska, Mas & Woodbury (2020), American Economic Review |
Linked employer-employee data, Washington State, Great Recession |
Losses come mainly from lower hourly wages that recover sluggishly; lost employer pay premiums explain only 17%; 70% of displaced workers moved to employers paying the same or higher premiums but still lost wages |
Three practical lessons follow:
- Timing matters. Being laid off when unemployment is high roughly doubles the long-run cost, because it takes longer to find a job and the offers are weaker.
- Tenure and fit matter more than the employer’s pay level. Lachowska, Mas and Woodbury find that losing a good worker-employer match explains more than half of the wage losses. Skills and knowledge that were valuable in one company are not always paid for elsewhere.
- Losses are larger for longer-tenured workers and, in Davis and von Wachter’s data, smaller for women than for men.
These studies are US-based and cover earlier recessions, so treat the figures as a guide to the mechanism rather than a forecast for 2026. If you have been laid off, the market for your role and how quickly you move matter more than any average.
What Happens to Pay for the People Who Stay
Survivors usually keep their salary, but their pay prospects change:
- Raise budgets shrink or freeze. After a restructuring, the money saved is rarely recycled into merit increases in the same cycle.
- Workloads rise. The same work is spread over fewer people, so effective pay per hour of work falls even if base salary does not.
- Pay compression gets worse. If hiring restarts later at market rates while existing staff had frozen pay, new hires can earn as much as, or more than, people who stayed. See our guide to pay compression.
- Retention offers go to a few. Companies often protect a small group of critical people with retention bonuses, which can widen gaps inside the same team.
Research backs the non-financial side. A national probability sample of 2,297 US workers (Frone and Blais, 2020) found that exposure to downsizing was adversely associated with 9 of 12 work conditions and all 16 employee outcomes studied, including job satisfaction and turnover intentions, with the effects running through those worse work conditions. When survivors feel overworked and underpaid, the best of them start looking, which is why the pay decisions after a layoff are as important as the layoff itself.
If you have no budget for raises after a restructuring, there are still levers: see alternatives to a salary increase.
Do Advertised Salaries Fall When Layoffs Rise? TalentUp Data
To test whether the recent layoff waves pushed advertised pay down, we compared US technology job ads from the same job board in the first nine months of 2025 and 2026. Using one source for both years avoids the biggest problem with job-ad data: changes in which sites are covered.
$116,700
median advertised tech salary in 2026 (n ≈ 7,800 ads)
+6.1%
vs $109,900 in the same months of 2025 (n ≈ 10,400)
16 of 26
common tech roles saw a higher median in 2026
6.6%
of 2026 tech ads published a salary, down from 8.3%
Source: TalentUp job postings database, US tech ads from one job board with an advertised annual salary in US dollars, January–September 2025 vs 2026.
| US tech ads, same source |
Jan–Sep 2025 |
Jan–Sep 2026 |
Change |
| Tech ads analysed |
≈ 124,700 |
≈ 119,200 |
−4.4% |
| Ads with an annual salary |
≈ 10,400 |
≈ 7,800 |
−25% |
| 25th percentile |
$73,600 |
$84,400 |
+14.6% |
| Median |
$109,900 |
$116,700 |
+6.1% |
| 75th percentile |
$139,700 |
$146,100 |
+4.6% |
Within 2026, the quarterly median moved between $113,900 and $120,200 (Q1 $115,800, n ≈ 2,400; Q2 $120,200, n ≈ 2,300; Q3 $113,900, n ≈ 3,100), so there is no sign of a steady decline during the year.
What the data says, and what it does not:
- No evidence of falling advertised pay. For tech roles still being hired in the US, advertised salaries held up or rose. That is consistent with companies cutting headcount rather than pay.
- The bottom moved most. The 25th percentile rose much more than the median. One possible explanation is that fewer lower-paid or junior roles were advertised with a salary in 2026, but our data cannot separate that from real pay growth.
- Role-level results are noisy. Across 26 roles with at least 50 salary ads in both years, the typical (median) role-level change was +4.0%, with 16 roles up and 10 down. Individual roles moved a lot in both directions, so do not read too much into any single one.
- Fewer ads disclose pay. The share of tech ads with a salary fell, which means the sample of ads with pay changed too.
We also looked at the UK, Spain, Germany and India, and at finance, consulting and retail. In those markets the mix of job sites in our database changed too much between 2025 and 2026 (and between quarters of 2026) for a fair comparison of ad volumes or salaries, and sector information is incomplete for recent months, so we do not report them. For a role-by-role view of current tech pay, see the most in-demand IT jobs in 2026.
Severance and Notice Rules by Country
Severance softens the immediate hit, but rules vary a lot. These are statutory minimums; collective agreements, contracts and company plans often pay more, and collective layoffs usually come with extra procedures.
| Country |
Statutory severance or notice (individual dismissal) |
| Spain |
Objective dismissal (e.g. economic reasons): 20 days’ salary per year of service, up to 12 months’ pay. Unfair dismissal: 33 days per year, up to 24 months (45 days per year for service before 12 February 2012, with caps) |
| France |
With 8+ months of uninterrupted service: at least 1/4 of a month’s salary per year for the first 10 years and 1/3 per year after 10 years |
| Germany |
No general statutory severance. Under §1a KSchG, if the employer dismisses for operational reasons and offers it in the notice, the employee gets 0.5 months’ salary per year of service by not filing a claim within the deadline |
| United Kingdom |
With 2+ years of service: 0.5 week’s pay per year under 22, 1 week per year from 22 to 40, 1.5 weeks per year from 41; weekly pay capped at £751 and maximum £22,530 for redundancies on or after 6 April 2026; up to 20 years counted |
| United States |
No federal severance requirement (the FLSA does not require it). The WARN Act requires 60 days’ written notice before a plant closing or mass layoff at employers with 100+ employees (thresholds: 50+ workers at a site closing; or 50+ workers and 33% of the site, or 500+ workers, in a mass layoff) |
Check the exact rules for your situation with a lawyer, works council or union: eligibility, salary definitions and caps have details this table cannot cover.
How to Negotiate Your Salary After a Layoff
A layoff weakens your negotiating position only if you let your old salary or your urgency define the conversation.
- Benchmark the market, not your last payslip. Your previous salary may have been above or below today’s rate for the role. Check current ranges by role and location before you name a number.
- Lead with skills that transfer. The research above shows that losses come from losing a good match. Show how your skills apply in the new company, not how things worked in the old one.
- Do not volunteer your previous salary. Under the EU Pay Transparency Directive, once transposed into national law, employers must give candidates the starting pay or range before the interview and may not ask about pay history. See how to set salary expectations under the Directive.
- Negotiate the package. If base salary is fixed, ask about a sign-on bonus, an earlier salary review, remote days, training or start date.
- Read the severance agreement before signing. Ask how long you have to review it, check accrued holiday, bonus and equity treatment, and understand any claims you waive.
- Weigh speed against level. Taking a slightly lower offer quickly can beat a long search when unemployment is high, but agree in writing when and how pay will be reviewed.
If you are deciding between staying put and moving more often after a layoff, our article on long-term work vs job hopping covers the pay trade-offs.
What Employers Should Do About Pay During Layoffs
For HR and Reward teams, a layoff is also a pay decision:
- Pay severance fairly and consistently. Apply the same formula to comparable roles, document exceptions and check outcomes by gender and age before you announce them.
- Protect key people selectively, and document why. Retention bonuses should rest on objective criteria (critical skills, succession risk), not on who asks loudest.
- Do not let survivors fall behind the market. A freeze for one cycle is common; two or three cycles while you hire new people at market rates creates pay compression and regretted departures.
- Explain the numbers. Tell people what was cut besides headcount and when pay will be reviewed again. Silence is read as “more cuts are coming”.
- Prepare for pay transparency. Where the EU Pay Transparency Directive has been transposed, workers can request pay information for their category, and employers with 100+ workers will report gender pay gaps (from 7 June 2027 for 150+ workers). Restructurings that leave unexplained gaps will show up. Our free pay transparency tool helps you check your ranges.
Benchmark both severance-adjacent decisions and new offers against current market data: see how TalentUp measures salaries.
Sources
- TalentUp job postings database: US technology job ads from a single job board, January–September 2025 and 2026 (see Methodology above).
- US Bureau of Labor Statistics, Job Openings and Labor Turnover Summary, August 2026 (released 29 September 2026): https://www.bls.gov/news.release/archives/jolts_09292026.htm
- Davis, S. J. and von Wachter, T. (2011), “Recessions and the Costs of Job Loss”, Brookings Papers on Economic Activity: https://www.brookings.edu/articles/recessions-and-the-costs-of-job-loss/ ; NBER summary: https://www.nber.org/digest/apr12/w17638.html
- Lachowska, M., Mas, A. and Woodbury, S. A. (2020), “Sources of Displaced Workers’ Long-Term Earnings Losses”, American Economic Review 110(10): https://www.nber.org/papers/w24217
- Frone, M. R. and Blais, A.-R. (2020), “Organizational Downsizing, Work Conditions, and Employee Outcomes”, International Journal of Environmental Research and Public Health 17(3): 719: https://doi.org/10.3390/ijerph17030719
- Spain, Estatuto de los Trabajadores (Real Decreto Legislativo 2/2015), arts. 53 and 56: https://www.boe.es/buscar/act.php?id=BOE-A-2015-11430
- France, Service-Public.fr, Indemnité de licenciement du salarié en CDI: https://www.service-public.gouv.fr/particuliers/vosdroits/F987
- Germany, Kündigungsschutzgesetz §1a: https://www.gesetze-im-internet.de/kschg/__1a.html
- UK Government, Redundancy pay: https://www.gov.uk/redundancy-your-rights/redundancy-pay
- US Code, 29 U.S.C. §2101–2102 (WARN Act): https://www.law.cornell.edu/uscode/text/29/2101
- US Department of Labor, Severance Pay: https://www.dol.gov/general/topic/wages/severancepay
- Directive (EU) 2023/970 on pay transparency: https://eur-lex.europa.eu/eli/dir/2023/970/oj