Nearly one in five
American companies do not provide severance pay for nonexecutive employees,
according to a new study of employer severance pay practices released jointly
by WorldatWork and Innovative Compensation and Benefits Concepts LLC.
Approximately 18 percent of 4,500 employers surveyed did not offer severance to
regular employees. Nearly half (42 percent) of companies that pay severance
have a “three-tiered” structure, according to the study, in which one tier
focuses on top executives, another on senior executives, and a third on the
rest of employees.
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Of those that do offer
severance pay, most companies (71 percent) use the number of years of service as
the basis for determining the amount they pay. Thirty-one percent of companies
provide one week of salary for each year of service, while 20 percent provide
two weeks of salary for each year of service.
Other criteria companies
considered in determining severance pay were the employee’s position and the employee’s
pay, taken into account by 21 and 17 percent of the respondents, respectively.
But the study notes that only 37 percent of employers have detailed severance
plans and policies in writing. Meanwhile, the study found that 69 percent of
companies had not reviewed their severance plan in the past 12 months and that
13 percent had never reviewed their plans since they were put in place.