Severance Amounts Paid by Organizations Unchanged in Five Years

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Boston, Mass. (July 20, 2016) – In its most recent survey regarding severance, ClearRock, Inc., a Boston-based leadership development, executive coaching, and outplacement firm, found 80 percent of employers are providing the same amount of severance to as they did five years ago when the company conducted its last survey on the subject.

Nearly all respondents (98 percent) stated Reduction in Force/Job Elimination as a reason for providing severance. Fifty-eight percent provide severance based on Poor "Fit" for Job or Organization.

More than 6 out of 10 employers state "Years of Service" as a determining factor for an employee to receive severance. This was closely followed by the fact that the employee must be full-time (nearly 61 percent). The percentage dropped to less than 20 percent for part-time employees.

Years of Service was also the top factor for determining the amount of severance by nearly all respondents. Just over 50 percent stated "Salary Grade/Level" as a factor, while 40 percent said full-time employment status and pre-negotiated employment agreements are factors. Many respondents added that the reason for exit was the deciding factor whether an employee receives a severance or not and, if so, the amount they receive.

More than 100 organizations participated in ClearRock’s 2016 Severance Survey. Seventy percent of respondents are from companies headquartered in New England, and the remaining 30 percent are spread across the country. Respondents represent more than 15 industries with the top three being Pharmaceutical/Biotech, Financial Services and Health Care. The largest number of respondents (30 percent) was from companies with 101-500 employees.

"When an employee is laid off, they are often required to work thought a specific date in order to qualify for severance," said Laura Poisson, President, ClearRock, Inc. "In this year’s survey, 38 percent of organizations stated they do not have policies on how work-through dates affect severance. This is an improvement, however, on the "more than half" who responded that they did not have a policy related to work-through dates in our 2011 severance survey." More than one-third of respondents do not provide any severance if the employee leaves during the work-through period.

Organizations noted that, in general, severance payments continue whether the employee finds another job or not as long as the employee remains through the work-through date (if that is even a requirement). Severance would stop, however, if the employee accepts another position within the company.

To request a free copy of the 2016 Severance Survey Report, please contact Jackie Shaw at (978) 250-4453 or Jackie@ClearRock.com.

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