If your company hasn't offered severance pay before, now's a good time to add it to your benefits lineup.
Reason: Choppy economic conditions the past few years saw many employees ousted without any severance. As the economy improves and hiring heats up, those skittish employees will look for safer waters, and they'll ask about your severance packages.
If you have a severance policy, you're already a step ahead of many competitors. Sixty-four percent of companies with fewer than 101 employees have a severance policy, according to consultants Lee Hecht Harrison. Offering any severance to part-timers would separate you from the pack. Only 39 percent of all employers give exit pay to part-time workers.
Most employers (60 percent) use a formula (usually years of service) to calculate an employee's severance pay. Other companies (34 percent) pay severance on a case-by-case basis. The danger: A case-by-case system opens you to discrimination claims.
What should you pay out? When severance is based on years of service, it's typical for exempt workers to earn one week's salary per year of service, says Lee Hecht Harrison. More senior execs are typically given two weeks per year of service.
What about employees fired after a year or less? Two thirds of participating companies set minimum severance
payouts, with two weeks pay the average for hourly employees, three weeks for salaried workers and four weeks
The average maximum severance pay for senior execs increased to 36 weeks, while remaining at 26 weeks for all other levels.
Final note: Severance is a good add-on perk, but it's usually not a deal-breaker. Seventy-two percent of people seeking professional jobs say they'd accept a position that offers no severance pay, according to a TruCareers survey. And 80 percent say they'd accept a severance package smaller than what they had requested.
Sample severance pacts
View sample severance agreements that you can adapt for your company at:
- How to Fire an Employee the Legal Way: 6 Termination Guidelines
- Complying With the FLSA Overtime Rules: The Duties Test
- Firing? Follow the 2-and-1 rule: Two company reps, one reason for termination
- Don't hang back: Jump in
- Promises, promises: Well-intentioned words may send fired employee in search of an attorney