More than half of Canadian firms give departing senior executives a month of severance pay for every year of service
Canadian companies tend to be more generous than their American counterparts when it comes to handing out severance pay for departing executives, according to The Global Severance Practices Survey.
More than half of Canadian firms give departing senior executives a month of severance pay for every year of service to the company. South of the border, 12 per cent of employers are that generous.
But Canada isn’t alone in being more generous than U.S. corporations when it comes to severance.
“A mid-level worker who is laid off from a Spanish company after 10 years of service can expect at least 10 months of severance pay, possibly more,” said Geof Boole, executive vice-president at Right Management Consultants, a Philadelphia-based career transition and consulting firm and authors of the study. “Contrast that with the average American worker, who is more likely to receive about ten weeks of severance pay.”
Common severance benefits
Half of the companies surveyed said they based their severance practices solely on years of service. The most commonly offered benefit to departing top executives was continuation of medical benefits (68 per cent), outplacement (58 per cent) and continuation of life insurance (31 per cent).
Other services offered include:
•Continued bonus and incentive plans (21.1 per cent)
•Retirement planning (19.7 per cent)
•Continuation of stock and share plan (19.1 per cent)
•Use of office space (16 per cent)
•Continuation of disability insurance (15.6 per cent)
Boole said he was surprised at the reponses.
“With all the publicity surrounding the hefty severance packages given to certain prominent top executives, it was surprising how few companies choose to provide some elementary services like financial and retirement planning and office space to their highest-paid people on their way out,” he said.
How much severance?
When asked how much severance pay per year of service was offered to departing top executives, companies offered these responses:
•Less than one week (2.5 per cent)
•One week (21.9 per cent)
•Two weeks (22.4 per cent)
•Three weeks (10.3 per cent)
•One month (25.7 per cent)
•More than one month (21.6 per cent)
•Plus age differential over 50 (12.3 per cent)
Factors
Boole said the single most important factor in how companies set employee termination practices was the legal environment in which the company operates. For example, companies in Europe and Latin America face numerous legal constraints that mandate a company’s actions when employees are terminated.
“But any multi-national corporation with offices in those countries must be aware of local and national laws regarding employee termination,” he said.
According to respondents, the most common event that triggered severance was a reduction in workforce (92 per cent) followed by a restructuring of an organization (89 per cent), elimination of a position (88 per cent) and relocation of the business (60 per cent.)
Outplacement
Many companies offer laid-off employees help in finding a new job. According to the survey, 83 per cent of companies who offer outplacement services do so because it’s the right thing to do.
Another 77 per cent said offering outplacement sent a positive signal to remaining employees, and more than half said it helped reduce the cost of litigation and was good for the company’s image.
The survey included 1,495 participants, primarily senior human resource executives, from organizations in Asia-Pacific, Europe, Latin America and North America. The survey was distributed and collected via the Internet during the summer of 2002. Of the participating companies, 32 per cent were public, 57 per cent were private, six per cent were not-for-profit (including charitable, cultural or educational institutions), two per cent were public sector or government agencies and three per cent were other.
More than half of Canadian firms give departing senior executives a month of severance pay for every year of service to the company. South of the border, 12 per cent of employers are that generous.
But Canada isn’t alone in being more generous than U.S. corporations when it comes to severance.
“A mid-level worker who is laid off from a Spanish company after 10 years of service can expect at least 10 months of severance pay, possibly more,” said Geof Boole, executive vice-president at Right Management Consultants, a Philadelphia-based career transition and consulting firm and authors of the study. “Contrast that with the average American worker, who is more likely to receive about ten weeks of severance pay.”
Common severance benefits
Half of the companies surveyed said they based their severance practices solely on years of service. The most commonly offered benefit to departing top executives was continuation of medical benefits (68 per cent), outplacement (58 per cent) and continuation of life insurance (31 per cent).
Other services offered include:
•Continued bonus and incentive plans (21.1 per cent)
•Retirement planning (19.7 per cent)
•Continuation of stock and share plan (19.1 per cent)
•Use of office space (16 per cent)
•Continuation of disability insurance (15.6 per cent)
Boole said he was surprised at the reponses.
“With all the publicity surrounding the hefty severance packages given to certain prominent top executives, it was surprising how few companies choose to provide some elementary services like financial and retirement planning and office space to their highest-paid people on their way out,” he said.
How much severance?
When asked how much severance pay per year of service was offered to departing top executives, companies offered these responses:
•Less than one week (2.5 per cent)
•One week (21.9 per cent)
•Two weeks (22.4 per cent)
•Three weeks (10.3 per cent)
•One month (25.7 per cent)
•More than one month (21.6 per cent)
•Plus age differential over 50 (12.3 per cent)
Factors
Boole said the single most important factor in how companies set employee termination practices was the legal environment in which the company operates. For example, companies in Europe and Latin America face numerous legal constraints that mandate a company’s actions when employees are terminated.
“But any multi-national corporation with offices in those countries must be aware of local and national laws regarding employee termination,” he said.
According to respondents, the most common event that triggered severance was a reduction in workforce (92 per cent) followed by a restructuring of an organization (89 per cent), elimination of a position (88 per cent) and relocation of the business (60 per cent.)
Outplacement
Many companies offer laid-off employees help in finding a new job. According to the survey, 83 per cent of companies who offer outplacement services do so because it’s the right thing to do.
Another 77 per cent said offering outplacement sent a positive signal to remaining employees, and more than half said it helped reduce the cost of litigation and was good for the company’s image.
The survey included 1,495 participants, primarily senior human resource executives, from organizations in Asia-Pacific, Europe, Latin America and North America. The survey was distributed and collected via the Internet during the summer of 2002. Of the participating companies, 32 per cent were public, 57 per cent were private, six per cent were not-for-profit (including charitable, cultural or educational institutions), two per cent were public sector or government agencies and three per cent were other.
