U.S. firms cut severance pay

2005

Getting laid off is becoming a more painful for many American professionals and executives as employers ease back on the amount of severance pay they award departing employees.

A new survey of more than 1,000 HR managers has found that while some senior staff are receiving smaller pay-offs, some secretaries and support staff receive slightly more severance pay now than they did in 2001.

A high portion of companies offer two or more weeks of severance pay per year of service, the survey for career-consulting firm Lee Hecht Harrison found, but the proportion of companies doing so declined slightly.

Some 54 per cent of companies now give that amount to senior executives, such as senior vice presidents, down slightly from 57 per cent who did so in 2001.

And 51 per cent percent of companies give two or more weeks to executives, such as vice presidents and department heads, down from 55 per cent in 2001.

Meanwhile, 38 per cent give two or more weeks to managers and professionals, down from 40 per cent.

In contrast, 33 per cent of companies said they give two or more weeks of severance pay to administrative and support staff, up from 29 per cent in 2001, according to the survey.

"When we last conducted this survey in spring 2001, the United States was at the end of a long period of economic expansion during which severance policies had become more generous," said Lee Hecht Harrison's Bernadette Kenny.

"Although we've seen some weakening ... organisations did not, for the most part, cut these benefits significantly," she added.

However the portion of companies offering less than a week of severance pay per year of service jumped dramatically.

One in seven (15 per cent) of the companies surveyed offer less than a week of severance pay to senior executives, up from 4 per cent in 2001, and 13 per cent offer less than a week to executives, up from 4 per cent.

Professionals saw a similar change: some 16 per cent of companies said they now offer less than a week of severance pay per year of service to managers and other professionals, up from 6 per cent in 2001.

The story is similar for administrative staff; 15 per cent of companies offer less than a week of severance to up from 9 per cent in 2001.

Meanwhile, the bulk of the companies offering two weeks or more of severance pay offer exactly two weeks per year of service, although a smattering of companies offer more than that to some workers.

Notably, 13 per cent of the companies surveyed offer senior executives a month of severance pay per year of service, and 10 per cent offer executives the same: a month of severance pay per year of service.

Another common figure is that of one week of severance pay per year of service. Some 32 per cent one third of companies offer that amount to senior executives, 37 per cent offer that to executives, 46 per cent offer that to professionals, and 53 per cent offer that to support and administrative staff.

These figures compare with statutory minimum redundancy pay in the UK of one week's pay for each complete year of employment for those aged between 22-40 and one and a half week's pay for those aged 41-64.

But as the Lee Hecht Harrison research pointed out, severance pay for senior executives is often negotiated on an individual basis.

Companies also base severance pay on salary level, title and employment agreement.

Overall, one third of the companies surveyed said they changed their severance-pay policies in the past three years, with about half saying their policies are now more generous.

But those companies that decreased their severance pay likely pulled back more severely than the other companies upped their pay, leading to the decline in severance pay for most workers overall, Kenny said.