Why expanding severance packages is good for business

All it takes is one negative tweet to go viral for a company’s reputation to take a hit.

That’s why more employers are focusing greater attention on their relationship with employees after they’re let go, according to a new report by RiseSmart. The career development firm finds that the right severance policy can bolster a company’s reputation and help employers recruit talent.

The number of companies monitoring sites such as Glassdoor and Indeed for negative employee reviews has increased by 10% since 2017, according to the report which surveyed more than 1,500 HR professionals across 18 industries. In that time, the number of employers offering severance benefits to all employees has increased by 6%.

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A man leaves an office building.

“We're really seeing more and more companies formalizing their approach to severance and expanding the level of the participants,” says Emily Elder, senior manager of practice development at RiseSmart.

In the past, severance packages were targeted towards senior leaders within an organization, but all that’s changing, Elder says.

“Now we're really seeing that about two thirds of companies with a formalized severance package have expanded their severance offering,” she says. “So it's covering all levels within the organization to include non exempt or hourly employees.”

Another key finding is that nearly 20% of surveyed companies say they’re improving their retirement offering through severance programs, which is a trend Elder says is related to an aging workforce.

Promoting an “employee-first” culture ranked as the top reason that companies are offering severance benefits. “Having a strong employee-first culture protects your brand and your brand impacts who you're able to engage with,” Elder says.

With the unemployment rate the lowest it’s been in decades, employers understand how fierce the competition for talent is.

Elder notes that former employees tend to have relationships with people in the same industry as their former company. If they feel spurned after being laid off, it could adversely affect their former employer’s ability to hire new talent.

Despite an economy that continues to add jobs every month, layoffs in the manufacturing and retail sectors continue to dominate the headlines. Along with stories about how automation and the Internet will displace workers, employees living in the shadow of the Great Recession are growing wary of a looming downturn in the economy.

“We're all getting used to the fact that our work life is much more mobile than it was in the past,” Elder says. “You really don't see a lot of people working for a company 20 plus years. In fact, the trend is three to four years.”

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