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May 01, 2009
Most Employers Use Set Formula to Calculate Severance
Less than one out of four employers negotiate severance packages with their employees, according to a survey on Compensation.BLR.com and HR.BLR.com.

When asked "Do you negotiate severance packages with each employee?," only 23 percent responded "Yes, we work out an agreement with each individual," while 77 percent responded "No, we use a set formula to calculate the package."

A recent study by Lee Hecht Harrison compared the separation practices between the 2001 economic downturn and the current one and noted how severance packages have changed.

The study found that after the 2001 recession, employees "learned to dictate their own severance terms through clauses in employment agreements and strategic negotiation," according to Lee Hecht Harrison. As a result, more employers are replacing boilerplate policies with individualized packages, the study found and the number of companies with formal severance policies dropped 24 percent from 2001 to 2008.

Moreover, the number of employers who say that negotiation played a role in severance packages in the Lee Hecht Harrison survey increased over 278 percent for officers and executives, by 520 percent for employees at the professional level, and 450 percent for employees at the administrative level since 2001.

The HR.BLR.com/Compensation.BLR.com poll included 217 respondents.

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