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Consider alternatives to cash severance

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in Compensation and Benefits,Human Resources

If you offer severance packages to terminated employees, don’t assume they’ll only settle for a lump sum of cash.

With the economy still recovering and uncertainty simmering over health care reform implementation, employees are choosing less severance pay and more benefits, such as outplacement assistance and continued health coverage.

No federal law requires you to pay severance. Only the following states mandate severance—and only in limited circumstances, such as plant closings and corporate buyouts that cost jobs: the District of Columbia, Hawaii, Idaho, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Montana, New Jersey and Rhode Island.

Advice: Negotiate noncash options into your severance plan. You could save money plus avoid legal trouble. Why? A departing worker who feels he has squeezed some concessions out of you is less likely to sue later.

Here are several alternative severance perks to consider:

  • Continuing payment of benefits for a limited time
  • Releasing the worker from a noncompete agreement
  • Allowing the employee to keep an advance of expense funds
  • Letting the employee keep his laptop or other company equipment
  • Agreeing not to contest his right to unemployment compensation
  • Helping the worker pay for job-search costs or moving expenses.

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