Project an Employee-First Culture by Offering Severance Packages

How an employee is treated on the way out can be just as important as how they are treated during their time with the company. A reputation for helping outgoing employees makes a business more attractive to top talent compared to its competitors.

As the nature of the workforce changes, the generosity and scope of severance packages are changing as well. Fifty-four percent of companies cite "projecting an employee-first culture" as a main reason to offer severance, according to the "2017 Guide to Severance and Workforce Transition" from outplacement firm RiseSmart.

"Companies that offer severance hope to establish themselves as great organizations to work for, to do business with, and to invest in,"  says Mark Gervase, director of product marketing for RiseSmart. "Offering severance communicates to current and future employees that the company will protect their best interests and that working for a company with a great reputation is personally beneficial. Companies choose to offer severance to put their stated company values into practice and to establish a competitive advantage in the market. Offering severance is a way to mitigate the risk of damaged employee relations in the event of a layoff or termination."

Rather than cutting a relationship off when an employee is let go, many companies try to contribute to the success of that ex-worker. Doing so has long-term benefits for both parties.

"Successful companies are expanding their responsibilities to include the entire employee experience, including severance," Gervase says. "In addition, former employee sentiment has taken on greater importance as laid-off workers often remain in the industry and may become customers, partners, or competitors."

Furthermore, there's always the chance that a company may need to rehire valuable talent in the future. Plus, social media and other online employer rating websites give laid-off workers a chance to air their grievances and negatively impact the company's brand, should they be moved to.

"As companies are learning, current and former employee recommendations and ratings can greatly affect an organization's ability to hire and retain talent," Gervase says.

Let Me Get That Door for You

"Don't let the door hit you on the way out" was once a common policy for severing relationships with employees, but in the online age, it's much more important for companies to provide positive outgoing experiences for their workers if they want to maintain positive employer brand images.

"Although benefits take many forms, health care and insurance are still the focus for most employers and employees before, during, and after an employee's tenure at a company," says Gervase. "In order to remain competitive in the market and attractive to future talent, more companies are including benefits outside of health care as part of their severance packages, such as previously eligible bonuses and payments, retirement planning services, retirement benefits, continuation of stock options, life insurance, financial planning, education, disability benefits, and outplacement."

In addition to offering money and a continuation of benefits to help employees transition, some businesses are beginning to reevaluate how much working notice they give to an employee before letting them go. Outside of the Worker Adjustment and Retraining Notification Act, which requires 60 days of working notice or equivalent compensation, 30 percent of those surveyed by RiseSmart cut employees loose within two weeks. However, there are plenty of reasons to extend that period.

"The benefit of working notice for employees is that it offers impacted employees the opportunity to begin their transition while still receiving compensation," says Gervase. "Working notice allows organizations to retain key talent during a critical time in restructuring, in some cases extending from six to twelve months."

The amount of working time offered obviously depends on the reason for separation, but it's in the best interests of any company to make sure each outgoing employee leaves as happy as possible. Your future recruitment efforts could depend on it.