69% of Leaders Expect Layoffs Next Year, and Severance Is Getting Less Generous

By the usual scorecard, 2026 has been a calmer year for layoffs than 2025. Announced cuts are down by more than a third. Yet the people who would have to carry out the next round are more convinced than at any point in recent years that it is coming, and the terms they will be offering departing employees are getting worse. That combination puts HR in an awkward spot: planning exits it may not control, on a budget it no longer sets.

Expectations Have Doubled While Cuts Have Fallen

LHH's tenth U.S. Severance and Separation Benefits Benchmark Study, released October 28, surveyed 600 HR and business leaders at U.S. organizations with 500 or more employees between September 9 and 22. It found 69% expect layoffs or reductions in force within the next 12 months. Among HR leaders the figure is 66%, up from 36% in 2024. Business leaders are more pessimistic still at 72%, and 80% of CEOs expect reductions. LHH notes that the 2024 study surveyed HR leaders only and that some questions changed between editions, so the comparison is directional rather exact.

The current data points the other way. Challenger, Gray & Christmas reported 43,281 announced U.S. job cuts in September, down 18% from August and the lowest September total since 2022. Year-to-date cuts reached 573,195, down 39% from 946,426 in the first nine months of 2025. But the reasons are shifting. AI is the leading cited reason for 2026 at 120,136 cuts, about 21% of the total, and technology accounts for 165,925 cuts, up 54% from last year. Employers announced plans to hire just 90,787 people in September, the lowest September figure since 2011. "Companies are in a wait-and-see period right now," said Andy Challenger, the firm's workplace expert and chief revenue officer.

Wait-and-see is where cost pressure builds. In isolved's 2026 HR Leaders Report, 89% of 1,005 HR decision makers reported at least one cost pressure shaping workforce decisions, led by benefits and healthcare costs (51%) and wage inflation (50%). Low hiring, rising costs and AI investment that has to pay for itself is the setup that turns a quiet year into a reduction plan.

Finance Is Writing the Exit Terms

The sharpest change in the LHH study is not how many leaders expect cuts but who decides what departing employees receive. HR leads severance and outplacement decisions at 30% of organizations, down from 58% in 2024. CFOs lead at 18%, up from 6%, and procurement leads at 13%, up from 2%. The packages are moving the way you would expect when the decision becomes a line item: 56% of organizations made severance more generous, down from 76%, and 38% made it less generous, up from 9%.

There is a partial offset. Career transition services now reach non-exempt employees at 79% of organizations, up from 58%, and exempt employees at 85%, up from 61%. Only 38% of organizations serving non-exempt staff offer comprehensive programs with one-on-one coaching and online tools, though. "Leaders need to make workforce planning an ongoing part of how they operate," said John Morgan, president at LHH. When finance owns the decision and planning is episodic, the cheapest package tends to win.

The Alternatives Carry Their Own Risks

Almost every respondent (99%) said their organization routinely evaluates alternatives to involuntary reductions. The most common are retirement incentives (42%), voluntary departure programs (41%), redeployment (38%) and temporary leave (38%). The first two are the fastest way to reduce headcount without a layoff announcement, and they lean heavily on older and longer-tenured staff.

That deserves more scrutiny than it usually gets. A Challenger analysis of involuntary retirement cites Bureau of Labor Statistics data showing that among long-tenured workers who lost jobs in 2023 to 2025, 38.6% of those 65 and older were reemployed by January 2026, against 57.3% of those 55 to 64 and 72.9% of those 25 to 54. It also cites AARP research finding 49% of adults 50 and older in the labor force want to learn more about using AI for work, yet only 12% have taken work-related AI training. "The risk is that employers mistake limited exposure to AI for limited ability to learn it," said John Challenger, the firm's CEO.

Put those numbers beside the LHH alternatives list and the trade becomes clear. A retirement incentive offered to someone who was never trained on the tools now reshaping their job is a layoff with better optics. Redeployment, by contrast, keeps institutional knowledge in the building, but only if the organization has mapped the skills it needs and is willing to fund the training to get people there.

For HR leaders who expect to be in the room for 2027 workforce decisions, the practical playbook looks like this:

• Get back in front of the decision. Bring a workforce plan to finance before it brings a reduction target to you. Severance policy set as a procurement exercise will be set on cost alone.
• Price the whole exit, not just the check. Model severance, outplacement, rehiring costs and lost knowledge together, so a smaller package is weighed against what it costs to replace the role later if demand returns.
• Make redeployment a real option. Identify adjacent roles and the skills gap for each before cuts are on the table. Redeployment that starts after the announcement rarely works.
• Audit voluntary programs for who takes them. If retirement incentives and buyouts land mostly on older workers who were never offered AI training, fix the training access first and document the criteria.
• Make outplacement match the population. Coverage for non-exempt staff has grown, but comprehensive support has not. Coaching matters most for the groups least likely to be reemployed.
• Cut overhead before headcount. With most HR teams under cost pressure, review administrative, payroll and benefits spend for savings that do not require a reduction in force.

Layoff expectations are a planning signal, not a forecast. The organizations that use the next few months to set their own terms for redeployment, severance and support will be the ones deciding what the next reduction looks like, if it comes at all.