Why you were laid off
Unpopular opinion. I know. This is going to sting a little.
The fact of the matter is, you became unprofitable. Let me explain.
Background
There was a time when a job was just that, a job. You showed up, put in your hours, and took home a paycheck. But as the workforce shifted during and after World War II, employers needed new ways to attract and keep people. Wage controls kept salaries in check, so companies got creative by offering pensions, healthcare, and other benefits. For a while, this became the norm: the promise of stability, a steady career, and the security of a pension at the end of the road. Then came the late 1970s and 1980s, when the pension model gave way to the 401(k). It was the beginning of a new era, retirement planning shifted from the company’s responsibility to the individual’s, and the “job for life” started to fade.
By the 1990s and 2000s, work had transformed yet again. The rise of Silicon Valley and the tech boom brought with it a new arms race: the perk wars. Suddenly, companies weren’t just competing with salary and benefits; they were dangling free lunches, yoga classes, game rooms, and unlimited vacations to lure top talent. For a while, it worked. Workplaces blurred into lifestyle hubs, and culture became as much a selling point as pay. But as the 2020s rolled in with remote work, economic pressure, and employees demanding substance over flash, the shine wore off. Today, the pendulum has swung back. More than ping-pong tables and nap pods, workers want fair pay, flexibility, and stability. In many ways, we’ve returned to the basics: once again, a job is a job.
The Numbers
Hiring a key employee comes with significant upfront costs that go well beyond salary. The average cost to hire includes recruiting expenses (job postings, recruiter fees, background checks), onboarding, IT setup, and training programs, which can easily total $35,000–$55,000 on top of base compensation. Factor in the productivity gap during the first 6–9 months, when new hires are operating at only 40–60% of capacity and the business is essentially paying full freight while capturing only half the value. This means the company is typically in the red after the first year, carrying an investment that needs to be recouped in the years ahead.
The timeline to profitability for a new employee is generally 12–14 months. During Year 1, costs outweigh value creation, but by Year 2, most employees are at full productivity, generating 1.5–2x their loaded salary in business value. For a role costing $120,000 annually, that means a potential $200,000–$250,000 in value output per year once they are fully integrated. From there, the profitability window widens, though raises, benefits, and perk creep begin to slowly erode margins. By Years 6–7, unless the role evolves or the employee significantly increases their output, rising costs can catch up to stagnant value creation.
Over time, compensation and perks inflate steadily. Raises of 3–5% annually, expanded healthcare contributions, and professional development stipends add $3,000–$10,000 in recurring costs each year. Add vacation accruals, wellness programs, or fringe perks, and the total yearly spend can rise from $120,000 in Year 2 to $150,000+ by Year 7. If value creation stalls around $200,000, the once-wide profit margin narrows to a slim $50,000. Without continued growth, employees risk tipping into unprofitability by Year 8 or 9, especially in industries where technology or automation reduces the relative value of human output.
To stay profitable, employees and employers both need to invest. Employers must commit $5,000–$10,000 per year into training, upskilling, and productivity tools to keep staff competitive. On the employee side, remaining profitable often requires going beyond 40 hours a week, with an extra 3–5 hours weekly invested in learning new systems, developing skills, or handling stretch assignments. Over the course of a year, that’s 150–250 hours of extra effort, the difference between stagnation and staying ahead of rising costs. This ongoing investment can extend profitability by 3–5 additional years, ensuring employees deliver ROI well into their tenure instead of plateauing.
The Stats
Year 1: $35k–$55k above salary in hiring/training costs; net loss.
Year 2: Break-even achieved; employee generating 1.5–2x cost.
Years 3–5: Profitability sweet spot (+$80k–$120k annually).
Years 6–7: Rising comp/benefits narrow ROI; risk of plateau.
Years 8–9: Without reinvestment, employee may turn unprofitable.
Ongoing investment needed: $5k–$10k per year + 150–250 extra employee hours.
Extension window: Up to 3–5 extra years of profitable employment if investment and effort are sustained.
CEO Responsibilities
For CEOs, it’s pretty clear: keeping employees profitable requires ongoing investment, not just in paychecks but in development and productivity. That means budgeting $5,000–$10,000 annually per head for training, certifications, and the right tools, while also ensuring managers provide clear KPIs and pathways for advancement. CEOs should think of employees like appreciating assets, when nurtured, their value grows faster than their costs. Without that reinvestment, profitability curves flatten, and once-strong performers risk becoming liabilities. The smartest leaders extend the profitable life cycle of their teams by aligning compensation with output, creating opportunities for upskilling, and fostering a culture where employees can take on new responsibilities and expand their contribution year after year.
Employee Responsibilities
For employees, staying employed, and employable, means owning their side of the profitability equation. Beyond showing up for the 40-hour week, they need to invest an extra 3–5 hours per week in sharpening skills, learning new systems, and staying current with industry trends. This not only keeps them profitable in their current role, it also ensures they’re market-ready if the business changes course. Employees who continually grow, adapt, and document their achievements build resilience against layoffs or stagnation. In today’s environment, the balance is to be a high-value contributor where you are, while always being prepared to translate that value into another opportunity if the need arises.
The Wrap Up
Work has changed dramatically over the decades, moving from a “job is just a job” model, to pensions and perks, to today’s focus on ROI and profitability. For CEOs, the challenge is more important than ever: talent is expensive, the break-even point is long, and profitability curves eventually flatten. That means leaders must manage costs with discipline, hire smarter with an eye toward long-term ROI, and continually reinvest in their people through training, tools, and growth opportunities. On the other side, employees must recognize that their value is tied not only to the hours they put in but also to the skills and adaptability they bring. Staying profitable requires going beyond the baseline, upskilling, putting in extra effort, and being ready to pivot if the role or company no longer provides the runway for growth. In larger companies, it may take 12–18 months for an employee to reach profitability, but in smaller businesses, where cash flow is tighter and the runway might be only 6–9 months, there’s far less margin for underperformance; if an employee isn’t delivering measurable value quickly, often within the first 90–120 days, they risk being out of a job.