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Are Employers Offering All Workers Severance Packages?

The economy's persistent shakiness has kept severance package policies on the minds of executives.

The BenchmarkPro 2011 survey revealed 60.5 percent of businesses now provide employee benefits to departing workers, indicating that severance pay is a prevalent practice among most employers. Proformative members have been discussing these benefits in recent weeks, and while it appears opinions and practices vary widely between companies, most recognize the benefits of having a severance policy, and some companies see the value in creating a package for every employee, rather than only executives and senior managers. While the details differ between businesses, finance and HR executives would be wise to periodically review their policy to be prepared if they need to make headcount changes because of budget cuts or low sales.

Are There Benefits to Giving Every Employee Severance Pay? 
More businesses are giving a severance package to all employees, whether they're executives, managers or new associates. This strategy has multiple benefits and can help both the business and employee during a particularly stressful time. Offering everyone severance helps a company soften the blow when they let go of their team members and can slightly ease the burden of one's sudden unemployment. It also helps a company retain a more positive image in a former employee's mind, which could be particularly helpful if that worker later lands a position with the corporation's business partner or organization it is pursuing.

To be sure, offering all employees severance also serves to help mitigate the risk of a lawsuit further down the road. Disgruntled employees may bring lawsuits against their former employers, no matter how unfounded they may be, and a severance package can help to rectify any soured relations and persuade a worker that litigation isn't necessary. 

What Is Considered When Determining Severance Packages? 
No company calculates severance pay the exact same way or gives it to the same number of staff members. While some companies may reserve these benefits for top executives, others may offer them to any employee who is laid off. There's no right or wrong way to go about determining which workers will receive severance when they're let go, but it's important to have a consistent internal policy across the board. To avoid controversy, many companies will give severance to all employees. 

Determining which employees will receive this benefit is only a small part of the equation - companies must also consider a variety of factors that will decide how much severance a worker is due. Packages will vary widely, especially if an organization is instituting a severance deal for all its employees. However, these factors generally apply: 

• Length of employment. A team member who has served a company loyally for many years will typically be eligible for more severance pay than a new hire or an employee who has been with a firm for only a few years. Companies often give their workers between one week and one month of pay for each year worked, meaning those who have an established history with the firm will receive more. 

• Position and level of responsibility. An employee who played a critical role in operations, managed a large team or handled high-risk accounts may be eligible for more severance pay than junior employees. This ensures a hard worker knows his or her skills and time spent on the job were appreciated.

• Contractual agreements. Some companies choose to spell out severance terms in an agreement ahead of time; in these instances, a company may be obligated to give a worker a set amount and not bother calculating any other factors into the package. 

What About Negotiations?  
A company may have a formula that takes into account multiple factors when determining how much severance pay employees will receive, but this doesn't prevent workers from trying to negotiate better deals. Some team members may try to enhance even the most generous benefits packages, and when a firm gives severance to all employees, excessive negotiation can become time consuming and costly. 

According to experts interviewed by Forbes, companies that want to avoid negotiations may want to consider group layoffs. Employees who are let go in a team setting may feel uncomfortable trying to get more out of their package, or recognize that because the terminations are widespread, there isn't much room for negotiation. These coaches also claimed employers feel guilty about letting workers go, making it fairly easy for staff members to play on these emotions and enhance their severance. Organizations that have decided to provide severance to all workers may want to ensure their HR departments and management teams are prepared to deal with such tactics ahead of time. 

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