If you’re going to get fired — it might as well be from the food/beverage/tobacco industry.
According to a Lee Hecht Harrison research study entitled, “Severance & Separation Benefits,” the food/beverage/tobacco industry ranks first among 15 industries in the generosity of termination benefits. The transportation and travel industry edged the energy/mining/natural resources industry for second place, according to the survey.
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Lee Hecht Harrison, established in 1974, is a New York-based outplacement and career services firm. Its survey queried about 2,000 human resource executives throughout the United States.
The good news, in fact, is that severance packages –though not mandated by law — are fairly common in today’s business world. Whether it is because a company is looking to shield itself from wrongful termination litigation or because it simply wants to maintain a reputation as a solid employer, severance packages, along with the layoffs that preceded them, are on the rise.
John Seraichyk, president of The Barrett Group, a Warwick-based outplacement agency that helps people find new jobs, said companies often find that it is in their best interest to treat employees well as they head out the door.
“Many companies today are offering severance packages as leverage to release themselves from an employee,” said Seraichyk. “When a company is laying people off, it has to retain a reputation in the employee market.”
Rounding out the list of 15 industries in the Lee Hecht Harrison study were: medical products/pharmaceuticals; insurance; banking and financial services; consumer products/sales/electronics; media and entertainment; hospitals/healthcare; industrial manufacturing; telecommunications and utilities; aerospace/defense; not-for-profit/government; computers and software; and professional business services.
The study gathered data on severance policy features that include eligibility and severance calculations, post-separation benefits and retention bonuses.
“While some industries moved up or down a place or two, there were few significant differences in where the industries ranked in 1995 versus where they ranked this year,” said China Gorman, a regional senior vice president at Lee Hecht Harrison.
Among the findings of the study:
- The typical U.S. organization calculates severance at one week per year of service regardless of employee level.
- The median minimum severance is four weeks for officers and executives and two weeks for exempt and non-exempt employees.
- The median maximum severance amount is 36 weeks for officers and 26 weeks for executives and other employees.
- At the vast majority of organizations, full-time officers, executives, exempt and non-exempt employees are all eligible for severance. And 48 percent of those organizations queried said that part-time employees are eligible for severance.
- Most organizations provide outplacement benefits to at least some employees at all levels. The majority of officers and executives get at least six months outplacement, exempt employees tend to get at least three months and non-exempt employees get less than three months.
Lee Hecht Harrison determined that with organizations throughout the country continuing to go through significant staff realignments, it made sense to study the issue of severance and benefits again, as it had done three years ago.
“Our last report was the most requested research study we have ever done and we have regularly received requests for updated information,” Gorman said.
Seraichyk said that after reviewing the study, he was a bit surprised by the high number of companies offering severance packages.
“For some people, it is the second or third time around,” he said.
Seraichyk suspects that his outplacement services will continue to be in demand, citing the rapidly changing health care industry as one example. Last week, the two largest health care organizations in the state, Lifespan and Care New England, announced a plan to merge. A week before that announcement, George Vecchione, Lifespan’s new president, said that efforts to reduce a rising deficit would be “painful.”
“Historically, when these types of mergers take place, there is obviously going to be some displacement of people,” said Seraichyk.
Seraichyk is quick to reiterate that companies are not offering severance packages out of a sense of goodwill. They do it because it is in their best interest, he said.
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If there is no empathy, a company can get a reputation as a place where people do not want to work,” said Seraichyk. “There are companies in Rhode Island that have that reputation.”
Terence Duniho, who helps people figure out “who they are and how to get to where they are going,” as president of Career Decisions in Providence, said severance statistics should be digested with a grain of salt.
“Any decent severance is often limited to people higher up on the scale,” Duniho said.
Duniho agrees that a fear of litigation does motivate some companies to offer severance, but he doesn’t see that as a particularly widespread practice.
“I don’t think companies feel too threatened by people on the lower end of the totem pole, which is of course the majority,” he said.
