Canadians receive more severance than U.S. workers

Employees laid off in Canada earn more severance pay than their American counterparts, irrespective of position or tenure, according to a new study.

HR consulting firm Right Management surveyed more than 1,500 HR professionals and senior managers in 28 countries, including 122 from Canada and 456 from the United States.

The study found that Canadian-based top executives who voluntarily left their employers earned 3.78 weeks of severance per year of service, compared to 2.76 weeks for their American counterparts and a global mean of 3.39 weeks per year of service.

During involuntary separation, top Canadian executives earn 4.66 weeks of severance per year, compared to 3.04 weeks in the United States and 3.52 worldwide.

Understanding how severance practices vary by country is a critical component of an effective global workforce strategy, said Douglas Matthews, Right Management president and chief operating officer.

“Severance can be used as a strategic tool to differentiate an organization in the tough war for talent and should be directly aligned with a company’s business strategy and brand value. Severance benefits should be consistent with the values and culture an organization espouses," he said.

Handling terminations and departing employees with dignity and respect will protect an organization from litigation, damaged morale and a negative brand image, said Bram Lowsky, Senior Vice President and General Manager, Right Management Canada

"Additionally having an effective change management strategy in place for those who remain is absolutely essential," he said.

Other key findings from the study:

• Seventy-six per cent of Canadian employers put a cap on severance payments, compared to 56 per cent of employers worldwide.

• Ninety-seven percent of separated employees in Canada are required to sign a waiver before they can access severance benefits.

• Sixty-seven per cent of companies in Canada tend to offer severance with no minimum tenure required, compared to 42 per cent doing so in the rest of the world.

Matthews recommends that employees who are offered severance benefits in any country should be asked to sign a general release of all claims against their employer – regardless of societal norms.

“At the very least, it may cut down on the few cases that are brought against employers outside North America; at best, it pre-empts a pattern of litigation in these areas before it even starts. Managing borderless workforces in a global economy may increase the provision of releases, as many North American practices tend to gain global acceptance over time.”

Mean weeks of severance per year of service: