Layoff Binge Spurs Severance-Policy Flux - Careers - CFO.com

Layoff Binge Spurs Severance-Policy Flux - Careers - CFO.com


But many companies are giving more to their ex-workers, not less, a new study shows.
David McCann - CFO.com US
April 10, 2009

Excerpts:

Among 180 companies surveyed by Hay Group, a human-resources consultancy, 15% had altered their severance policies in the year before the survey was conducted, around February 1, and an additional 22% said they are considering making changes.

In the Hay Group survey, the changes are less generous to those employees receiving severance at 61% of the companies that have made or are considering them. The other 39% are offering or contemplating better terms for the ex-workers, so revising the policies is far from an across-the-board cost-cutting strategy.


For companies that are improving the terms, a fairness component may be at work, since laying people off right after diluting severance policies makes for a harsh double whammy. If the motivation isn't fairness, it's probably public relations. "Companies that have the means may be thinking that there are going to be people on the street talking about their separation experience," says McMullen.

The result of all the changes is a more clearly defined set of common market practices, adds McMullen.

Changes may be made to:
- the definition of who is eligible for severance;
- other eligibility requirements, such as length of service;
- the type of payment (salary continuance versus flat-dollar amount);
- whether to include bonuses and incentive awards as compensation for determining payouts;
- whether to continue benefits during the severance period;
- confidentiality, noncompete, or other restrictions imposed on those getting severance;
- the provision of outplacement services; and
- whether to require former employees to forgo severance benefits when they get a new job.

That last consideration is one Wynkoop says many of her clients are now looking at, with more of them opting to stop payments when a position has been secured. (Among the Hay Group survey respondents, 25% have such a policy.) Most companies doing that also don't provide benefits continuation or pay part of the ex-employee's COBRA health-care cost, so people are highly incentivized to find a job, she notes.

An even more recent flurry of changes came about as a result of the economic stimulus package that became law in February, adds Wynkoop. The law provides that the government will pick up 65% of COBRA premiums for up to nine months for employees terminated involuntarily from September 1, 2008, through December 31, 2009. The ex-workers pay the other 35%. But the law stipulates that if the employer had a policy in place to pay, say, half of the COBRA premium, former employees must pay only 35% of the half they would otherwise owe, with the company responsible for making up the difference.

That's why, says Wynkoop, in just the past two months she has seen many companies abolishing COBRA assistance.

Read Full Article: http://www.cfo.com/article.cfm/13476553
***********************************************************************
This posting was made my Jim Jacobs, President & CEO of Jacobs Executive Advisors. Jim also serves as Leader of Jacobs Advisors' Insurance Practice.