U.S. Employers Offer Less Severance Pay

December 2, 2008 (PLANSPONSOR.com) - A new global study has found that employees laid off in the United States earn the least amount of severance pay worldwide-no matter what level of employee or amount of tenure with the organization.

A Right Management news release about its severance pay study foundUS-based employees consistently earn less severance per year of service than colleagues around the world.

Top executives earned as little as 2.76 weeks of severance per year of service, compared to a worldwide mean of 3.39 weeks per year of service, according to the survey. The disparity increases as the level of employee decreases.

The news release said US employers are also more likely (68%) to enforce a cap on severance payments than the rest of the world (56%).

Ninety-six percent of separated employees in the US are required to sign a waiver before they can access severance benefits, which Right Management said “reflect(s) the litigious culture of this country.” Unlike in other regions, 61% of companies in the US tend to offer severance right away with no minimum tenure required, compared to 42% doing so in the rest of the world.

“Severance can be used as a strategic tool to differentiate an organization in the tough war for talent and should be directly aligned with a company’s business strategy and brand value,” said Right Management President and COO, Douglas Matthews, in the news release. “Severance benefits should be consistent with the values and culture an organization espouses.”

According to Right Management, the mean weeks of severance for those in the U.S. who were voluntarily separated included:

  • Top executives, 2.76
  • Senior Executives, 2.23
  • Department Heads/Managers, 1.55
  • Professional/Technical, 1.39
  • All other employees, 1.23

The global study across 28 countries drew from more than 1,500 responses from human resource professionals and senior managers responsible for making severance decisions in their organization, including 456 from the United States.

Right Management engaged International Communications Research to conduct the study between July and September 2008. Of the 1,524 survey responses received, 45% were from the Americas, 34% were from Europe, and 21% were from Asia Pacific.

More information is available here .