Does your company have a severance policy in place? What is best practice in your industry?
The days of rich severance packages are long gone. I worked for a company that provided a month for every year of service. I beleve the standard today is two weeks/year. Availability of an outplacement firm for a set time frame is a nice perk.
Our company has an ERISA based severance policy that provides benefits based on career levels and years of service.
I know of companies that are currently providing in the two-four week per year range of severance pay. Depending on the number of staff to be severed, 60 day notice will or should be required.
Do we need to consider the reason for the employment separation in the discussion here? Does it depend on "down-sizing" vs. a performance (termination for cause) issues?
I don't understand. Why would you pay severance for a termination for cause?
Severance can be less expensive than the unemployment ding. Severance = quitting technically, so the employee has no right to an uninsured claim including some costly insurance benefits. Severance also usually comes with legal disclosures, depending on the level of the employee. (protecting human and intellectual capital)
So, it can be cost effective to pay severance to an employee that is being dismissed on cause.
Poor word "cause" may just be that it is just time for the person to "move on". You want to part ways in an amicable manner. Maybe they have outgrown the company or you have outgrown them. Also, say someone has 20 years and they make a mistake for which you want to let them go, no severance, really?
In my experience, when reductions are for cause no severance; but for a reduction in force you give severance. If you just wish to part ways amicably, there is a third form, "negotiated parting." This situation is not policy but a negotiation, I.e. what will it cost for you to resign? Seek the help of an attorney. Employment law is a specialty, with many land mines.
I think in Europe they have a leave policy referred to as "Garden Leave." This is defined as a time frame (weeks to months) where an employee stays an employee, might even be required to show up to work, gets paid, but is really not doing any company work other than looking for a new job. I'm not sure my opinion on this, but for someone whose time has come to move along, this could make the point and give them structured time to focus on a new career.
Most companies I have worked for avoid having an actual documented severance policy since it sets a precendent that can give rise to litigation if you change your policy to the detriment of a particular set of laid off employees. I am not a legal expert, so I don't know if not having a formal policy actually helps reduce the risk. That said, typically what I have seen is 2 weeks for the first year of work (or fraction) and 1 week for every year thereafter.
I would concur there are different "flavors" of severance. Having a documented / communicated policy for "vanilla" severances (e.g. RIF) depends on transparency in the organization's culture. You want to be consistent in how you arrive at severance packages (documented or otherwise) so there is not bias or discriminatory practices alleged. For those circumstances that just want to exit the employee without going through the performance management (e.g. improve or progressive discipline) that could potentially eliminate the needs for any severance, you still should be consistent with how you exited similar employees (4 wks, 2 months etc whatever is the norm for your company).
Key executives negotiate their own agreements.
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