The Grey Area of “Quiet Cutting” and How HR Can Handle it Transparently

May is Mental Health Awareness Month and it’s well known that uncertainty in the workplace can harm employees’ well-being. Budget cuts, restructuring, shifting priorities, or witnessing the impact of AI can leave workers wondering about the future. When that happens, HR is left with the role of maintaining trust while helping the business to evolve—and one of those situations is when companies adopt the controversial practice of quiet cutting. But do you know what it is?

This article explores the meaning of quiet cutting, why companies use it, how it affects both employees and employers, and how HR can respond to those challenging scenarios with transparency and integrity.

Quiet cutting is when an employer reassigns workers to new, often less desirable, roles instead of laying them off. This way, employers hope employees leave voluntarily, reducing headcount without formally cutting jobs. Quiet cutting is seen as a grey area between layoffs and voluntary termination, which avoids severance pay or reputational fallout from layoffs. 

For many, however, those reassignments are the same as demotions. Workers might be offered roles with lower pay, reduced visibility, or completely different responsibilities. Often, these decisions come with little notice or explanation, which can create distrust and erode morale.

Quiet cutting reflects a shift in the workplace power balance. In the first years after the pandemic, employees had an upper hand, leading to trends like the “Great Resignation” or “quiet quitting.” In those cases, workers changed jobs looking for better benefits or work-life balance, or decided to stay, but did the bare minimum while waiting for the next opportunity. Quiet cutting, on the other hand, signals that employers are regaining control in a cooler job market.

During quiet cutting, employees often feel blindsided, demoralized, or devalued. The psychological impact is real: a perceived demotion or forced change in duties can disrupt professional identity, motivation, and mental well-being.

A striking 79% of workers surveyed by Monster Intelligence reported having less trust or loyalty toward their employer after experiencing or witnessing quiet cutting. Moreover, 75% wouldn’t recommend the company to a friend and 73% say they’ve lost respect for their leadership.

Some employees respond by quiet quitting—disengaging and doing the bare minimum while searching for new opportunities. Others may experience anxiety, stress, or burnout. In a time when mental health awareness is a growing priority, these outcomes should not be taken lightly.

For employers, quiet cutting might seem like a viable strategic solution but it often creates more problems than it solves. After all, productivity drops and workplace culture suffers when employees feel misled or sidelined. Turnover may increase and remaining employees may question their job security.

Negative reviews on sites like Glassdoor, increased employee disengagement, and reputational damage (internally and externally) can all follow a poorly handled quiet cutting process. Worse, companies risk losing high-potential talent who no longer see a future within the organization.

Yes, quiet cutting is legal in Canada, although it comes with some risks. If employees are offered new roles with lower compensation and status or worse working conditions, they might file a constructive dismissal claim. Under Canadian law, constructive dismissal occurs when employees are forced to resign due to substantial changes in their role without consent.

So, even if the role change is technically legal, employers must tread carefully. In addition to ethical concerns and reputational harm, a reassignment that appears punitive or strategically designed to push someone out can lead to litigation.

HR teams and managers play a crucial role in dealing with situations perceived as quiet cutting. Transparency, integrity, empathy, and clear communication are essential to maintaining trust during those difficult transitions. Here’s how HR can handle quiet cutting more ethically:

Avoid sugarcoating what’s going on. Reframing those reassignments as a “new opportunity” without context will erode credibility. Be honest about business drivers such as budget constraints, automation adoption, or workforce restructuring.

Don’t back employees into a corner. Offer clarity about what the new role entails, how it fits into future business plans, and—when possible—the choice to decline without retaliation. If roles must change, give people the tools and support to succeed.

Connect changes to larger company goals and show employees they’re not being singled out. Transparency helps to soften the blow and provides a clearer path forward. Silence or spin only deepens mistrust.

Changes in role or status can severely affect employee mental health. Recognize the emotional toll of workplace transitions and provide access to resources like mental health programs or Employee Assistance Plans (EAPs). Mental health matters and this is a good opportunity to elevate support initiatives.

Outplacement services are generally offered to laid-off employees, so they wouldn’t apply if someone decides to leave voluntarily. However, this approach will reassure those who remain that, if things take a turn for the worse, the company will help them to find a new opportunity. That’s why outplacement services boost morale and engagement while minimizing disruption.

Quiet cutting might be legal, but it has real risks to culture, morale, and mental health. While it can be tempting for companies to manage headcount through reassignment, the emotional cost to employees and the reputational cost to employers can outweigh the savings.

HR teams must lead with empathy and clarity. In an era where mental health awareness is front and center for workers worldwide, honest conversations and supportive policies go a long way. Whether employees stay or go, treating them fairly and respectfully can safeguard your culture, improve retention, and build long-term loyalty.Finally, maybe you’re considering outplacement services to maintain engagement, reduce stress, and help employees to get back on their feet. If that’s the case, contact our experts at Careerminds today to learn about our modern approach to outplacement. Ask them about our results-oriented approach and outstanding satisfaction and engagement rates!