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August 06, 2002
Employers Skimping on Severance Pay
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Employers are giving increasingly sparse severance packages to departing employees, according to Kiplinger's Personal Finance.
Severance pay hit a record high in 1999 when employers were giving laid off workers an average of 24 weeks of pay. This year, however, workers can expect to receive, on average, a mere eight weeks of pay.
One factor influencing the decline is the fact that employees change jobs more frequently than in previous years. Severance pay is based on the length of employment, and so frequent job-changing leads to less severance pay, Kiplinger's reports.
And while the economy is suffering, the unemployment rate, at 5.8 percent, is still relatively low. When employees will find another job relatively quickly, employers don't feel compelled to provide a large severance package.
A survey conducted by the Society for Human Resource Management in 2001 found that 80 percent of laid-off workers receive some type of severance pay. Generally, employees receive one week of pay per year of employment, down from two weeks for every year ten years ago. Some executives may receive a month of pay for each year of employment.
Kiplinger's also reports that most companies provide health insurance in addition to severance pay. But that could be short-lived. Some companies also cut off severance pay as soon as the laid off worker finds a job elsewhere.