Non-Exec Severance Still Uncommon
A news release said the study by WorldatWork and Innovative Compensation and Benefits Concepts LLC (ICBC), an HR consulting firm, found that of those employers with a severance plan, 71% use years of service to figure the amount of severance payments. Nearly one-third of companies (31%) offer a week’s salary per year of service, while one out of every five employers (20%) provides two weeks of salary for every year.
Employers also consider an employee’s position (21%) and pay (17%), according to the announcement.
Of the companies paying severance, 42% offer a
three-tiered structure focusing on the top executive, all
other employees.The poll found that only 37% of surveyed companies
have detailed severance plans and policies in writing.
Also, annual reviews of non-executive severance plans are
rare. In fact, 69% of organizations have not reviewed
their severance plans in at least the past year, while
13% reported having never reviewed their plans.
Study author Bob Jones asserted in the news release that
annual reviews of an organization’s severance and
change-in-control plans, especially because of the size
and importance of these plans, should be conducted by
Compensation Committees. “This is a best practice in
general – in conjunction with a tally sheet analysis of
the top executives’ Total Rewards – in order to ensure
that plan costs are being prudently monitored,” said
Jones. “This is best done by making this topic an agenda
item that is covered on a regular, recurring basis.”
The Severance and Change-in-Control Practices 2007 survey
was conducted in June 2007. Surveys were sent
electronically to 4,590 WorldatWork members with a
response rate of 11% (523 responses).
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