When a situation arises that involves the departure of an employee, one of the first considerations on the mind of that worker as well their HR representative is often the potential for severance. Over the past few years, though, there has been a decline in the number of employers that have a formal policy and package in place – according to the Society for Human Resource Management, 55% had written severance policies in 2017, representing a 10% decrease from 2011.
Although this trend is continuing in the current corporate working environment of 2019, it's also a topic that some HR managers and employer decision-makers may want to rethink. Having a robust, official policy for severance packages and the contingencies that come along with them is actually a beneficial way to support the company's workforce, as well as its brand reputation.
The state of severance today
Despite just over half of all businesses having a severance policy, this isn't to say that the workplaces without a formal, written procedure are leaving their departing employees high and dry.
Overall, SHRM reported that 97% of American businesses do provide some type of severance to employees, while it appears that many organizations prefer to work outside of a formal policy. This includes, according to statistics from Lee Hecht Harrison talent development firm and Compensation Resources Inc. pay consultancy organization:
- 88% of businesses that provide severance pay when an employee is laid off or the workforce is otherwise forced to be reduced.
- 13% that offer a package when termination comes due to cause.
- 6% that pay severance at retirement.
"We're definitely seeing more companies moving away from formal, written policies in favor of more flexible terms," noted Lee Hecht Harrison Senior Vice President Greg Simpson. "That having been said, severance and separation benefits remain among the best ways for a company to protect its brand."
In defense of a formal policy: Safeguarding the brand while supporting employees
Even when an employee is on their way out of the company, it is still up to the human resource team to ensure that this worker is supported. This includes, namely, offering some type of severance, with certain contingencies like the termination of any legal liability between the employee and employer, as well as protection for the company's reputation.
As EBN contributor Sharif Paget pointed out, it's now easier than ever for employees to air their true opinions about a company. And something like a less-than-satisfactory exit from a business can foster considerable negativity on the part of the departing staff member.
"All it takes is one negative tweet to go viral for a company's reputation to take a hit," Paget wrote. "That's why more employers are focusing on greater attention on their relationship with employees after they're let go."
Now, not only is it important to offer severance to all employees to support their satisfaction and peace of mind, but HR teams should also go the extra step and put in place a formal, written policy outlining the specifics of the package. Not only will this help eliminate the chances of a rogue, former employee negatively impacting the company's reputation, but a severance package can also serve as a key differentiator in benefits.
"With the unemployment rate the lowest it's been in decades, employers understand how fierce the competition for talent is," Paget wrote.
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