A new report, Severance Practices Around the World, issued by global consultants Right Management provides benchmarking data for human resource professionals and senior executives responsible for separating employees from their employ.
The global study across 28 countries draws from more than 1,500 responses from human resource professionals and senior managers responsible for making severance decisions in their organization.
It is not surprising that either a reduction in workforce (77 per cent) or an organizational restructuring (75 per cent) are the main triggers for activating the provision of severance, notes Douglas J. Matthews, president and COO of Right Management. “The fast-changing and demanding global market is placing increased pressure on companies to compete more effectively. The subsequent result may be frequent restructuring, downsizing or cutbacks. And when those initiatives are implemented, departing employees need to be supported with severance practices that are aligned with the company’s sense of corporate responsibility and values.”
Understanding how severance practices vary by country is a critical component of an effective global workforce strategy. Key findings from the study include:
- Across all regions, severance and termination policies are primarily governed by a combination of company policy and local/national law (62 per cent).
- In the event of employee termination, most companies (63 per cent) are required by law to give a certain amount of advance notification to the employee.
- Just over half (58 per cent) of those surveyed said their company had a formal, written severance policy.
- Eligibility for severance differs by region, with over half of companies in the Americas (54 per cent) having no minimum requirement and far fewer companies in Europe (32 per cent) and Asia Pacific (34 per cent) saying the same.
- Top executives earn the most severance per year of service, whether they are voluntarily separated (3.39 weeks per year) or involuntarily separated (3.52 weeks per year).
- Regardless of position or type of separation, severance is most frequently offered throughout the world as a lump sum payment.
- More than half (56 per cent) of the companies surveyed put a cap on the severance calculation.
- Regardless of employee level, the most common benefits included in a severance package are assistance programs (like outplacement and financial planning), continued benefits (such as healthcare and financial compensation), and to a lesser extent, company resources such as an office or car.
- Seventy-three percent of terminated employees are required to sign a waiver or release before they can access severance benefits.
- Although not legally required, most companies (73 per cent) provide outplacement services.
“Whether you are responsible for managing a workforce in one country or many, senior executives and human resource professionals in organizations of all sizes and industries can use this data to compare their own practices with broad-based norms to ensure they are providing fair and equitable packages to those who need to leave their employ,” says Matthews.
Intended for anyone responsible for making severance decisions, the full report on “Severance Practices Around the World” can be downloaded at www.right.com/globalseverance. The report includes differences by region, industry, market maturity and level of employee.
Right Management engaged International Communications Research to conduct the study in 28 countries between July and September 2008. Of the 1,524 survey responses received, 45 per cent were from the Americas (including 456 from the United States), 34 per cent were from Europe and 21 per cent were from Asia Pacific. A broad cross section of industries was represented. Right Management is a leading provider of integrated human capital consulting services and solutions across the employment lifecycle.
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