Benefits September 17, 2002

Severance Pay Suffers Cuts Along with Jobs

September 17, 2002 (PLANSPONSOR.com) - The amount of severance pay US executives receive continues to drop and may never return to its once generous levels, a new study said.

Reported by

Fred Schneyer

According to the latest Job Market Index from Challenger, Gray & Christmas, the time covered by severance pay has plummeted by 54% over the last three years to the average of 10 weeks through Q2 2002 from an average 21.8 weeks in 1999.

CEO John Challenger said the severance period cutbacks are likely caused by the still faltering US economy as well as the run of corporate scandals, which have generally increased the scrutiny of company benefit packages.

Challenger contended that the generous severance pay coverage isn’t likely to return even when the economy recovers. Not only was the longer severance a by-product of the late 1990s boom economy, Challenger argued that severance pay isn’t as effective as it once was to keep employees around.

Besides, Challenger contended, many executives are turning to lower-cost morale-boosters such as employee training and work-life balance initiatives.

The Challenger Job Market Index is a quarterly survey of 3,000 discharged managers and executives.