Happy New Year, you're fired

2005

It will be anything but a happy New Year for many U.S workers, with more than a quarter of businesses saying they plan to lay workers off and even more intending to do so without providing any severance pay, a new study has said.

The survey of 500 firms by WorldatWork and Aon Consulting is at odds with a study from Manpower earlier this week suggesting U.S firms were likely to continue hiring, rather than firing, in 2006.

The WorldatWork/Aon survey suggested 28 per cent of companies were planning layoffs next year, while 26 per cent were unsure if reductions would be necessary.

Worse from the employee's point of view was the finding that 30 per cent of the 500 did not have a formal severance plan in place.

"The job market is more volatile than ever, with the competition for top talent extremely fierce," said WorldatWork president Anne Ruddy.

"To attract and retain the best employees, companies need to offer key rewards like severance plans, which may be a make-or-break deal for those employees," she added.

Of those employers offering a severance plan, 85 per cent used the number of years served as the basis for determining the amount of severance provided.

Nearly one-third offered one week's salary per year of service, while approximately a quarter of employers provided two weeks of pay for every year served.

Other factors considered in determining severance include an employee's position and compensation.

Annual reviews of non-executive severance plans were rare, according to the study. In fact, 63 percent of organisations had not reviewed their severance plans in at least the past 12 months.

Specifically, for 22 per cent of employers, a severance plan review had not occurred during the past 12 to 24 months.

For 29 per cent of companies, it had been more than 24 months since they examined their severance plans, while 12 per cent of organisations had never reviewed their plans.

Of those that did assess their severance plans on a regular basis, 61 per cent reported making no changes during the most recent review, while 11 per cent decreased the pay provided and another 11 per cent increased it.

"Change is the norm in today's corporate environment, so companies should review their severance plans at least annually, to ensure alignment with their current business objectives," said Pete Lupo, senior vice president with Aon Consulting.

"For example, we're beginning to see an increase in merger and acquisition activity. M&As require significant focus from employees, whether these workers are asked to complete the terms of the transaction or remain steadfast in their traditional job requirements.

"It would be difficult for employees to accomplish their goals without knowing what it ultimately means for them. In this type of situation, a well-developed and well-communicated severance plan is essential," he added.