Employee Severance: It’s Not Just Nice — It’s a Savvy Business Move

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This is a great time to be an employee. Not only is historically low unemployment giving workers more leverage in the job market, but companies are also expanding benefits packages to entice new talent and keep existing team members from looking elsewhere.

According to a new study from RiseSmart, employers feel that boosting severance benefits is one of the ways they can project an employee-first image in today’s competitive hiring market. The “2019 Guide to Severance and Workforce Transition”  surveyed 1,500 HR professionals around the world to identify the most striking trends in how workers relate to the companies that employ them. Here are four of the key takeaways:

1. More Companies Are Offering Severance Benefits to All Levels of Workers

Forty-four percent of all employers surveyed said they now offer some form of severance benefits to all employees, not just to senior managers. That’s a 6 percent increase from 2017.

This is welcome news for mid- and low-level workers. If predictions prove true and the US economy goes through a period of recession in the next few years, layoff activity will accelerate. Workers can be comforted knowing their companies will provide a cushion if and when that happens.

At the same time, it is also becoming commonplace for workers at every level to change jobs every few years. An increase in severance benefits means fewer displaced workers will experience financial anxiety after being let go, and they won’t be forced into jobs that don’t make them happy just to make ends meet.

2. Corporate Leaders Fear Negative Reviews

A full two-thirds of HR professionals surveyed said they monitor websites like Glassdoor and Indeed for negative reviews, a 10 percent increase from 2017.

The power social media has to damage company brands has been proven time and again. Perhaps that has something to do with why 50 percent of companies with severance policies are offering outplacement services as part of those packages. Outplacement services may include any number of job-seeking benefits like resume creation, personal career coaches, tailored job leads, and professional branding assistance.

When a displaced worker feels supported with job-search tools provided by their former employer, they can focus more positively on the future. This optimistic frame of mind makes former employees less likely to spend their time brooding over past mistreatment — whether real or perceived — from a former employer. As a result, the employees is also less likely to post negative reviews of the company on job-search sites and social media.

Outplacement, then, is not simply a nice thing to do — it’s a way to cover your bases as an employer.

3. More Companies Are Opting to Redeploy Workers Rather Than Lay Them Off

Sixty percent of all survey respondents reported having programs designed to match employees with as many open internal positions as possible as an alternative to separation. Employees who want a change and know their company is open to internal transfers are more likely to explore internal options before conducting an outside search.

Since many companies are simultaneously laying off in one business unit and hiring in another, robust redeployment offerings can reduce layoffs significantly while preserving institutional knowledge and reducing the costs to recruit, hire, and onboard new employees. A redeployment program can also help incentivize good performance and build a more familial company culture in which managers look to hire or promote from within.

4. Companies Are Motivated to Establish Employee-First Cultures

When HR leaders were asked why they offered severance benefits to separated employees, the top reason given was to project an employee-first company culture. In today’s tight labor market, workers now have the leverage to choose employers that treat them well at every step of the employee life cycle — from the moment they are onboarded to the moment they leave, whether by choice or not.

When unemployment was higher, companies could be more demanding of their employees, confident that those who quit could quickly be replaced. In today’s economy, however, employers are must expand benefits to woo job seekers and convince top talent not to search elsewhere for a better deal.

Emily Elder is senior manager of practice development at RiseSmart.

By Emily Elder