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He predicts that more employers are likely to cap severance payments to departing employees and pay flat amounts rather than linking payments to years of service. At the same time, employers are recognizing the need to assist terminated employees who have worked at companies for short periods by boosting minimum payments, Stoeckmann said. "Whereas two weeks has been the prevailing practice for minimum severance payments, we might expect to see the balance begin to shift in favor of one-month minimums to assist those employees with less service," Stoeckmann said.
MORE ISBETTER
Despite recent employer cost cutting, 65 percent of 1,072 surveyed HR executives said their companies have maintained their severance policies, although 19 percent have made them "more generous," according to HR consulting firm Lee Hecht Harrison (Woodcliff Lake, N.J.) in a recent survey. A report released in March by the Philadelphia-based Hay Group found that more than one-third of 180 employers (39 percent) are enhancing their severance offerings. "The most surprising finding from the survey was the fact that many of these companies were considering making their programs more generous, rather than less," the report's
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SEVERANCE, DEFINED
Severance benefits provide pay and sometimes other services to employees while they seek new employment. Employers give severance benefits to employees whose jobs are eliminated, and some provide benefits to employees who retire, resign voluntarily, or are fired for cause. "The depth and severity of the current recession and the resulting job losses have put pressure on companies to try to minimize severance costs while at the same time treat employees fairly in providing some financial cushion against their job loss," said Jim Stoeckmann, senior compensation practice leader at WorldatWork in Flagstaff, Ariz.
authors said. "This finding suggests that companies with less competitive severance programs understand that having a population ofdisgruntled former employees may cost the company more than the potential cost savings of reduced benefits is worth," the Hay Group said. "In other words, there's a cost to treating people unfairly."
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Coping With Severance: Costs, Legal Challenges, and Morale
ith layoffs comes the question of how much severance to give to those being separated from your organization. The financial considerations of what you can afford to give in these times when so many layoffs are driven by economic changes is a top concern. HR professionals and their employers also struggle with how to structure the severance package, how to avoid legal disputes, and how to maintain good relations with departing employees so that when the economy recovers, rehiring them will be a viable option.
CONSIDER YOUR BRAND
Employees are watching how their employer treats its departing workers and will consider this when the economy rebounds and they have a chance to leave for a new job, agreed attorney Robert Jones, CEO ofconsulting firm Innovative Compensation & Benefits Concepts in Bryn Mawr, Pa. He said that "most companies are going to try to hold the line on what they've been doing" with regard to severance. Find out whether your key talent views the company's termination and severance practices as fair and equitable, recommended Philadelphia-based consulting firm Right Management in a recent report. "Recognize that brand building happens in bad times and in good times," said Right Management. "Use your severance and termination practices to differentiate yourself as a place where top talent want to work."