Although employers have been recently cutting payrolls, severance and change-in-control plans haven't been affected by the recession, finds a new study by WorldatWork and Innovative Compensation and Benefits Concepts LLC, an HR consulting firm.
Based on the Severance and Change-in-Control Practices 2011 study, many employers continue to retain a separate written severance plan for the CEO, key executives and the rest of the employees. Tenure, position, salary and employment agreement appear to be the most important factors in determining severance status.
Typically, one or two weeks' severance pay per year of service is offered, and many employers provide a level of benefits up to the maximum, the study finds. Despite the poor economy, 44 percent of respondents still fully or partially subsidize COBRA for the entire workforce.
Recommended For You
Of those surveyed, almost half say they provide outplacement benefits to all affected employees, and 36 percent provide it depending on the situation, a jump from 27 percent in 2009. Tax gross-ups, which are when an employer increases the amount of a cash payment to counterbalance the tax impact on the individual resulting from the cash payment, is on a steady decline. Six percent of respondents report providing full or partial gross ups of their executives' severance pay, an 8 percent decrease from 2009.
"One finding that may come as a surprise is that severance and change-in-control plans are being reviewed less frequently by companies today than two years ago," says Don Lindner, CCP, executive compensation practice leader for WorldatWork. "But that doesn't diminish their importance as employee benefits and tools to ease the job transition."
"Because of the size and importance of executive severance and change-in-control plans, annual reviews should be conducted by compensation committees," says the study's author, Bob Jones, JD, CPA, CEBS. "This is best done by making this topic an agenda item that is covered on a regular basis."
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
