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A new global study by Right Management has found that employees laid off in the United States earn the least amount of severance pay worldwide - no matter what level of employee or amount of tenure with the organization. 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, including 456 from the United States. U.S.-based employees consistently earn less severance per year of service than colleagues around the world. Top executives earned as little as 2.76 weeks of severance per year of service, compared to a worldwide mean of 3.39 weeks per year of service. The disparity increases as the level of employee decreases. For voluntarily separated employees, the survey showed weeks of severance pay as follows:
For involuntarily separated employees, the survey showed weeks of severance pay as follows:
Understanding how severance practices vary by country is a critical component of an effective global workforce strategy, advised Right Management President and COO, Douglas Matthews. "Severance can be used as a strategic tool to differentiate an organization in the tough war for talent and should be directly aligned with a company's business strategy and brand value. Severance benefits should be consistent with the values and culture an organization espouses."
"Companies in the United States lead the way with regard to the practice of waivers and releases—meant to cut down legal claims against employers by separated employees," said Matthews. "Countries outside the United States do not require releases as frequently, due at least in part to their cultures not being as litigious and the rights of terminated employees are more defined by statutes and regulations."
Matthews recommends that employees who are offered severance benefits in any country should be asked to sign a general release of all claims against their employer—regardless of societal norms. "At the very least, it may cut down on the few cases that are brought against employers outside the United States; at best, it pre-empts a pattern of litigation in these areas before it even starts. Managing borderless workforces in a global economy may increase the provision of releases, as many United States' practices tend to gain global acceptance over time."
Matthews recognizes that the concept of severance has changed a lot from the days when it was simply used to provide compensation/benefits for employees whose positions were eliminated. "As organizations are challenged to attract and retain the needed talent to compete effectively, separation agreements may not mean a complete separation from the employee, but rather serve as a means to continue the relationship on an as needed basis."
Severance is a complex issue, no matter where in the world you operate, cautioned Matthews. "It is an essential responsibility to get right because it has a dramatic impact on the lives of the individuals who have been in your employ or remain in your organization, as well as those who might be attracted to your company in the future."
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 percent were from the Americas (including 456 from the United States), 34 percent were from Europe and 21 percent were from Asia Pacific. A broad cross section of industries was represented.
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