Companies Cut Cash Severance

July 11, 2001 ( - Cash severance payments to terminated employees have plunged by 20% in the last four years, a recent survey finds.

The survey of 178 companies across the US by Manchester Inc. found that compared to 1997, the average maximum severance payment in 2001 for:

  • non-exempt employees fell to an average maximum of 24 weeks from 30 weeks,
  • middle managers declined 15% to 28 weeks from 33 weeks, and
  • for senior-level executives decreased 12% to 37 weeks from 42 weeks.

Number Crunching

In addition, compared to 1997 numbers, the average severance calculation formula for:

  • senior-level executives fell to 1.7 weeks of severance per year of service, from 2 weeks, while the median calculation formula remained static at 2 weeks.
  • for middle managers rose slightly to 1.7 weeks from 1.6 weeks, while the median severance calculation formula rose to 2 weeks from 1.5 weeks.
  • for non-exempt employees remained the same, an average of 1.4 weeks of severance per year of service, and a median of 1 week.

The pharmaceutical and biotechnology industry was found to be the most generous in severance packages this year, taking over the top spot from the chemicals industry which gave the largest packages in 1997.

Silver Lining

However, compared to 1997, more companies are providing out placement assistance, health insurance, and access to Employee Assistance Programs to terminated employees in 2001.

And 74% of the organizations surveyed now allow employees to keep the full amount of their severance regardless of how quickly they find other jobs, compared to 72% four years ago.