Some 2006 Layoffs Will Be Without Severance

December 14, 2005 ( - Many of the companies anticipating 2006 layoffs will be trimming their workforce without providing severance pay.

A news release said that a survey of almost 500 major organizations by WorldatWork and Aon Consulting found that 28% of companies are planning to fire workers in 2006, while another 26% are unsure if reductions in force will be necessary. Meanwhile, a third of all the employers surveyed don’t have a formal severance plan in place.

The study revealed that, of those employers offering a severance plan, 85% use the number of years served as the basis for figuring out the severance amount. Nearly one-third of companies (32%) offer one week’s salary per year of service, while about a quarter of employers (23%) provide two weeks of pay for every year served. Other factors considered in determining severance include an employee’s position (23%) and compensation (20%).

Annual reviews of non-executive severance plans are rare, according to this study. In fact, six in 10 of organizations have not reviewed their severance plans in at least the last year. Specifically, for 22% of employers, a severance plan review has not occurred during the past one to two years. For 29% of companies, it has been more than 24 months since they examined their severance plans, while 12% of organizations have never reviewed their plans.

Of those that look over their severance on a regular basis, 61% report making no changes to their plans during the most recent review, while 11% decreased the pay provided and another 11% increased the pay provision.

“The job market is more volatile than ever, with the competition for top talent extremely fierce,” said WorldatWork President Anne Ruddy, in the news release. “To attract and retain the best employees, companies need to offer key rewards like severance plans, which may be a make-or-break deal for those employees.”