More U.S. employers are offering enhanced severance packages to fired employees even as job cutbacks mount and profits decline, a survey shows.
Companies are offering outplacement services, individualized packages and longer periods of severance pay and health coverage, according to a 2008 survey released today of more than 1,000 human resource executives by Lee Hecht Harrison, a Woodcliff Lake, New Jersey-based career consulting firm.
“After the 2001 recession, employers learned how you treat someone departing is essential to brand equity,” said Rob Saam, senior vice president of Lee Hecht Harrison, which compared the 2008 survey with one taken by the firm in the recession of 2001. “Unless the company is going under, they’ll step it up and do what they can to preserve their reputation in the long run.” Unemployment reached 8.1 percent in February, the highest number in more than a quarter century, and the U.S. has lost 4.4 million jobs since the recession began in December 2007, based on data released by the U.S. Labor Department earlier this month.
Profits for U.S. corporations decreased by about $500 billion in the fourth quarter of 2008 compared with a decrease of $56.3 billion in the third quarter, according to the Washington-based Bureau of Economic Analysis.
The number of employees who negotiated severance packages increased threefold in 2008 from 2001, and 65 percent of companies offered outplacement services to help displaced executives find new jobs compared with 50 percent in 2001, the survey said.
Guarantees Needed “Before upper-level executives, especially those in the financial sector, will even start a new job, they need guarantees, and that includes severance guarantees,” said Richard Greenberg, a partner in New York at Jackson Lewis, a national law firm based in White Plains, New York, that represents management in employment litigation.
More employees may have been able to tailor their packages because the number of companies with written severance policies declined to 60 percent in 2008 from 79 percent in 2001, the study said. Employers are also more concerned about employee litigation, requiring 93 percent of workers to sign a release in exchange for severance compared with 76 percent in 2001.
Another survey conducted in February by Watson Wyatt Worldwide Inc., a consultant in Arlington, Virginia, found that of the 52 percent of companies that had job cutbacks, 29 percent said they offered enhanced severance packages, including pay, health insurance and outplacement services for a longer period of time.
‘Fair and Generous’ “I feel that my severance package was fair and generous,” said Jose Gonzalez, 32, who worked as an analyst at a fund of funds for three years before losing his job in January. Gonzalez said he received several months’ salary and one month of health benefits.
About half of U.S. companies provide severance packages, which are not required by law, the survey said. Severance pay is usually one to two weeks per year of service, said Saam of Lee Hecht Harrison. Under the Age Discrimination in Employment Act of 1967, if employees are 40 or older, they must be given at least 21 days to consider the package, said Greenberg, the employment attorney.
Review Offer “You should never sign anything when your head is spinning,” said Martha Finney, author of “Rebound: A Proven Plan for Starting Over After Job Loss,” who recommended taking several days to review the terms of a severance package. Employees should ask about deferring the departure date and compensation for unpaid bonuses, company stock and unused vacation time, said Finney, who is based in Santa Fe, New Mexico.
Dismissed employees should keep their severance pay in a high-yield checking or savings account that is insured by the Federal Deposit Insurance Corp. so it is accessible, said Tim Maurer, a certified financial planner at Financial Consulate in Hunt Valley, Maryland.
Some employees may find their firms are less amenable to severance-package negotiation. Andrew Lisy, who worked as a convertible bond trader at Merrill Lynch & Co. in New York for 18 months, was given a few months’ severance pay and health insurance coverage.
“I think it would have been a moot point to try to negotiate,” said Lisy, 24, “Given the number of layoffs with the Bank of America merger, the severance packages seemed pretty canned and non-negotiable.” Bank Cuts Bank of America Corp., based in Charlotte, North Carolina, and New York-based Citigroup Inc. have cut 46,150 and 38,900 employees, respectively, according to data compiled by Bloomberg.
Sara Bloomquist, a spokeswoman at Bank of America, said employees’ severance packages are based on their role at the bank as well as years of service. She declined to comment on whether severance packages could be negotiated.
One-fifth of 228 firms polled in December by Hewitt Associates Inc., a human resources consultant based in Lincolnshire, Illinois, said they planned on changing their severance rules to conserve funds, with 43 percent expecting to cut back cash payments and 21 percent planning to reduce other benefits, such as health coverage.
Lee Hecht Harrison surveyed 1,072 human resources executives who work in the industrial manufacturing, financial, health care, non-profit, retail, insurance and professional business service fields throughout 2008. The majority of firms surveyed had more than 1,000 employees.
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