Benefits and Compensation

Fewer Organizations Implementing Hard Minimums/Maximums on Severance Packages

A new survey confirms there are major changes afoot in severance and separation benefits that will dramatically impact employer brand and talent management.Severance

Lee Hecht Harrison (LHH), a talent development and transition company, and Compensation Resources, Inc., a consulting firm specializing in the design and implementation of organization-wide compensation programs, surveyed 350 senior Human Resources executives and leaders who are responsible for helping their organizations manage talent. The main topics explored in the study include severance, outplacement, redeployment, stay bonuses, and early retirement programs.

Among the major findings in the 2017-2018 Severance & Separation Benefits Study is that severance remains the method-of-choice for organizations concerned with protecting employer brand: almost all businesses (97%) in the study said they offer some form of severance.

However, the study found only 55% have formal, written severance policies. That is a decline from the 2011 survey results, when 65% had formal severance policies.

The survey of Human Resources managers also revealed that fewer businesses are setting firm minimum and maximum severance amounts. In 2011, more than 70% of businesses had written policies on minimum and maximum severance; by 2017, it dropped to just over half (52%).

Notwithstanding these trends, the message from Human Resources professionals was clear: Severance and separation benefits that include new approaches to outplacement continue to play a key role in the war for talent.

“We’re definitely seeing more companies moving away from formal, written policies in favor of more flexible terms,” said Greg Simpson, Senior Vice President and Career Transition Practice Leader at Lee Hecht Harrison. “That having been said, the survey shows clearly that severance and separation benefits remain among the best ways for a company to protect its brand.”

Driven by the relentless technological and demographic changes in today’s economy, Simpson said most companies are in a constant state of transformation—eliminating jobs while at the same time opening up new opportunities. The LHH survey shows that severance and separation benefits are key tools in the management of transformation initiatives.

The research also identifies how the redeployment of talent—placing people in new roles within the organization as opposed to simply laying them off—is an underutilized strategy. Only 19% of surveyed organizations have implemented some form of redeployment program.

“Redeploying talent leverages an organization’s internal talent management systems to match employees with open internal positions,” Simpson added. “This can help retain valued talent while eliminating risk from high turnover and, ultimately, reduce severance costs.”

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