Severance plans continue to be key employee benefit: Survey

Nearly one-half of U.S. employers also provide outplacement benefits
|hrreporter.com|Last Updated: 08/16/2011

While United States employers have been slashing payrolls in recent years, they haven’t been trimming their severance packages, according to a new study by WorldatWork. Severance and change-in-control plans have survived the recession fairly intact, found Severance and Change-in-Control Practices 2011.

“One finding that may come as a surprise is that severance and change-in-control plans are being reviewed less frequently by companies today than two years ago,” said Don Lindner, executive compensation practice leader at WorldatWork. “But that doesn’t diminish their importance as employee benefits and tools to ease the job transition.”

Many organizations still maintain three severance plans: one for the CEO, one for key executives and one for everyone else, according to 31 per cent of the 567 survey respondents.

The most important determinant of severance status is years of service, according to 92 per cent of survey respondents, followed by position (39 per cent), pay level (33 per cent) and employment agreement (24 per cent).

Most organizations still provide two weeks’ severance pay per year of service (21 per cent).

Nearly one-half of survey respondents provide outplacement benefits to all affected employees while 36 per cent provide it on a case-by-case basis, up from 27 per cent two years ago.

Tax gross-ups —

the practice of increasing the amount of a cash payment to offset the tax impact on the individual resulting from the cash payment — continue to decline. Six per cent of respondents said they provide full or partial gross-ups of their executives’ severance pay, down from eight per cent in 2009.

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