Severance tends to pop up on the public radar either in instances of executive compensation or when a tax or related change in the law takes place. Such cases tend to be guided by precedent and existing policy. When it comes to severance as part of company policy for all employees, however, no standard appears to exist.
That's what RiseSmart found when it surveyed more than 250 U.S. human resources managers about their employee transition policies. While the most often cited reason for offering severance to departing workers was "to take care of employees," rarely did they all get taken care of with a severance check.
"When asked why they provide severance, the majority of the HR professionals selected as their top three reasons to 'take care of employees,' 'limit company liability,' and 'protect employer brand,'" said Sanjay Sathe, president and CEO of Rise Smart.
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"But based on the actual benchmarks, the actions companies take when implementing a severance policy don't necessarily support those goals."
For instance, RiseSmart said, about six in 10 respondents said their firms offered severance to all departing employees. When sliced and diced by industry, that number was often less than half. In banking and finance, 44 percent said they offered severance to all employees.
The study, Guide to Severance and Workforce Transition, queried those in the survey about their outplacement, redeployment, and health plan continuation as well as severance.
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Dan Cook
Dan Cook is a journalist and communications consultant based in Portland, OR. During his journalism career he has been a reporter and editor for a variety of media companies, including American Lawyer Media, BusinessWeek, Newhouse Newspapers, Knight-Ridder, Time Inc., and Reuters. He specializes in health care and insurance related coverage for BenefitsPRO.
