At some point, your organization will face the difficult reality of having to let one or more employees go. It is never an easy conversation to have, nor is it particularly pleasant to think about. However, due to redundancies, restructuring or economic necessity, if you want to remain a competitive organization you need to be prepared to face the question of how you will help your employees transition out of the company.
If you approach this reality proactively, not only will you be better equipped to provide the best resources for affected employees, but you will also be able to turn your severance package into a benefit for both your employees and your organization.
1. Brand. Employer brand is an HR buzzword. Even if you are not directly involved in talent acquisition, you still have the opportunity to affect how your brand is perceived by candidates and alumni. Just as outstanding employment benefits can make or break your talent acquisition, so can competitive severance. It differentiates your employer brand and offers the opportunity to showcase the benefits of being a part of your company ecosystem from candidate to alumni.
Moreover, a well-planned severance package can help temper the potential for negative sentiment during a layoff. Knowing that there is transition assistance, for example, can leave affected employees with a more positive view of the company and may create opportunities for positive word of mouth in public forums, such as employer review websites like Glassdoor. Keep in mind when crafting and implementing your severance policy, however, that you have to measure its effectiveness. Currently 61% of employers who say employer brand is a top concern do not monitor their brand during a layoff.
2. Benefit. Offering severance makes good business sense, but at the end of the day, severance should be more than a check on the to do list. It should be offered with your employees best interest in mind.
Taking care of employees during their transition was selected by survey respondents as the No. 1 reason their organization might offer severance but in order to actually achieve that outcome, companies must take into consideration the elements that will truly benefit their transitioning employees.
Offering reasonable notice outside of the Worker Adjustment and Retraining Notification Act, a suitable percentage of the salary, continuing benefits like health care and a faster career transition with outplacement services sends the message that you invest time into considering your employees needs at all stages of the employee lifecycle.
3. Legal. As you plan your severance, you should weigh the pros and cons of a formalized severance policy. According to the survey, about 30% of organizations do not have a formal severance policy in place. While formalized severance makes it easier for organizations to standardize benefits and show consistency in their policies, a non-formal policy allows for more flexibility from a legal standpoint.
Your severance planning must be done with the needs of your organization in mind. If you want to be able to show consistency across the board during a mass layoff, you may benefit from having a formal policy in place; if you prefer to offer severance on a case-by-case basis, then you may choose to have a non-standard policy. Keep in mind that if you formalize your severance policy and then offer inconsistent packages, you may open your organization to litigation, based on precedent.
Ultimately, your decisions about how you offer severance will affect the liability your organization may or may not face in the future, so it is important to plan your severance with potential legal ramifications in mind.
Sanjay Sathe is the president and CEO of RiseSmart, an outplacement solutions and career transition service provider.
