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Companies Reduce Severance Packages for Laid-Off Employees

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Companies Reduce Severance Packages for Laid-Off Employees

A recent survey conducted by Dutch recruitment firm Randstad NV reveals that only 42% of global employers offered severance to all laid-off employees this year, a decline from 64% in 2021. The United States had the lowest percentage of employers offering severance to all employees, with just one in four doing so. In comparison, about half of firms in the United Kingdom and Germany extended severance to all employees. The survey also found that over 90% of the 430 firms surveyed plan to reduce their workforce in the next 12 months.

Impact of COVID-19

The COVID-19 pandemic has prompted companies to reevaluate their severance policies. Lindsay Witcher, global managing director of Randstad's RiseSmart outplacement and career transition division, noted that the pandemic created a turning point for companies to improve the experience for employees exiting the organization.

Severance Discrepancies

The survey revealed discrepancies in severance packages across different countries. In the United States, 37% of employers offered a payout of three to four months' salary, while the United Kingdom and Germany were more likely to offer up to six months' pay. Randstad RiseSmart highlighted that many U.S. employers are providing the bare minimum when it comes to supporting departing workers. Severance packages vary widely depending on the organization and employee's position. They are typically calculated based on a certain number of weeks' pay per year of service, along with continued healthcare benefits. However, the survey found that only half of the firms polled indicated that everyone in their organization was familiar with the severance policy. In conclusion, the survey highlights a trend of reduced severance packages for laid-off employees. While some companies are making changes to their severance policies, others are offering redeployment programs to help employees find alternative positions within the organization. However, the survey also raises concerns about companies over-hiring during prosperous times and the potential lack of learning from this cycle in the future.

Hot Take: The Impact of Reduced Severance Packages on New Businesses

The recent trend of companies reducing severance packages for laid-off employees, as revealed by a survey conducted by Randstad NV, could have significant implications for new businesses. This shift in corporate culture, driven in part by the COVID-19 pandemic, may influence how startups and new companies structure their own severance policies.

Reevaluating Severance Policies

New businesses may find themselves under pressure to reevaluate their severance policies in light of this trend. While the pandemic has prompted many companies to improve the experience for departing employees, the reduction in severance packages could potentially undermine these efforts. New businesses must strike a balance between cost-effectiveness and providing adequate support for their employees.

Learning from Past Mistakes

The survey also raises concerns about companies over-hiring during prosperous times, a cycle that many businesses seem to repeat. New businesses should take heed of this trend and implement strategic hiring practices to avoid unnecessary layoffs and severance costs in the future. In conclusion, the trend of reduced severance packages presents both challenges and opportunities for new businesses. By learning from the mistakes of established companies and prioritizing the well-being of their employees, new businesses can navigate these challenges and establish themselves as responsible and caring employers.
Story First Published at: https://financialpost.com/fp-work/companies-stingy-severance-laid-off-employees
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