Second Round of Cutbacks Likely

June 13, 2001 ( Companies that have downsized in the last 18 months will probably do so again, findings of a survey reveal.

The so-called Severance & Retention Practices: 2001 Survey, which examines executive employment agreements and companywide severance pay practices, was undertaken by Unifi Network, a subsidiary of PricewaterhouseCoopers.

The sample comprised 114 companies, approximately 50% of which have downsized within the last year and a half.  Of these, half plan to downsize again within the next 18 months. 

The manufacturing industry is most affected by downsizing, with 61%, of the 38 respondents in this industry reporting downsizing or plans to downsize within the 18-month timeframe.  In contrast, only 8% of respondents from the not-for-profit industry reported the possibility of downsizing again.

Severance Policies

Survey results also show that 88% of the sample has some type of severance policy, while 62% of respondents offer employment agreements to their executives. Of those who offer agreements:

  • more than 90% have agreements for CEOs
  • more than two-thirds have agreements for senior management
  • 44% of those with a severance policy have a minimum years of service requirement in order to receive severance payments
  • more  than three-quarters of these include a minimum requirement for senior management.