We humans have an irresistible urge to compare ourselves to others. Often – say, when it has to do with looks or intelligence – the compulsion to compare can be decidedly counterproductive. But in the business world, seeing how you stack up against others can be an extremely effective tool to boost your own performance and competitiveness.
Take, for instance, the severance package. In our recently released 2014 Guide to Severance & Workforce Transition, we surveyed over 250 Human Resource professionals in the U.S., most of whom were vice presidents or directors of HR, and many of them from Fortune–ranked businesses. Although the study examines a host of topics and questions, it also reveals some common benefits among the 70 percent of organizations that have formal severance policies in place. This study reveals what it is that talent will see if and when they must be let go—and what they will talk about with friends, family, and social networks.When it comes to productive comparisions, this survey allows HR professionals to not only see what their competitors and peers are up to, but also proactively benchmark their own policies in order to stay competitive with their severance policies in the coming years.
See Where You Stand
What does an average severance package look like these days? It is clear from our survey results that many companies are not just offering a check. In fact, the vast majority of respondents – 70 percent, to be precise – have a standard COBRA or health plan continuation for all employees in the event of a mass layoff. About a third of those companies continue to pay premiums directly to the insurance company, while around 15 percent give a lump sum to employees to cover all or part of the cost of premiums. Among the companies that do offer COBRA, a little over 40 percent said the amount of time for benefits to continue was equal to the ex-worker’s severance salary continuation.
Responses to the survey question about how the all-important issue of severance pay is handled were interesting. Among the 48 percent of organizations that said they have a standard payout formula, the top factors for calculating what that amount would be were: years of service, job level or title and base salary. What that translated to was that companies with standard payouts most often offered three months of salary as severance.
Also intriguing is that 70 percent of the respondents that said they offer severance packages reported that outplacement services were part of the benefits. There was a wide range in how long outplacement services were available – 32 percent said three months and 26 percent said six – and great discrepancy in the amount of money devoted to outplacement depending on the position of the person leaving the company. Still, outplacement does appear to increasingly be a standard offering in severance packages.
Why an Exceptional Severance Package Matters
How you stack up in terms of the severance package and services you offer to transitioning employees will go a long way toward determining the immediate and long-term future of your company. Think about it. From the perspective of an employee who is remaining with the company, how you treat their departing coworkers is in indication of how you may treat them in the future, which can damage or elevate the morale. Your immediate financial performance can also be impacted. Former employees who find a new job quickly thanks to your outplacement efforts will cost you less in both state and federal unemployment insurance.
Additionally, given the prevalance and importance of social media, expect that those former employees who feel snubbed and mistreated on their way out the door will be vocal with their unhappiness. Enough of this kind of negative commentary will eventually damage your brand’s reputation and make it more challenging to lure the talent your company needs to survive. And don’t forget the ramifications of negative sentiment when you decide you want to either rehire an impacted employee for a critical role or end up working with that former employee as a customer or partner in the future.
Increasingly, companies understand the wisdom of offering generous severance packages. And with the transparency and prevalence of employer brands on the Internet, know that you will be judged in comparison to your competitors. Make sure that you retain talent, save costs, and fortify your recruiting effors and your employer brand by benchmarking your way to a stand-out severance package.