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September 06, 2005
Severance Pay Down from 2001 Levels
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yle type="text/css"> TR, TD {font-family: Verdana, Arial, Helvetica, sans-serif ; font-size: 7.5pt ; color: #000000;} Employees let go today are likely to get less severance pay than they would have in 2001, but their prospects are still better than they were in 1998, according to a survey by global career services company Lee Hecht Harrison.

The 2005 study is based on a survey of 1,030 human resources executives from a representative sample of U.S.-based organizations. The company surveyed similar populations in the spring of 2001 and 1998.

As in prior years, severance payouts for employees at all levels are typically determined, at least in part, on years of service. Since 2001, the percentage of companies giving two weeks or more per year of service has declined slightly--though not back down to 1998 levels--at every employee level except administrative:

2005 2001 1998
Senior Executives (EVP, SVP or equivalent) 54% 57% N/A
Executives (VP, department head, director) 51% 55% 37%
Professionals (managers, functional staff) 38% 40% 29%
Administrative (secretarial and support staff) 33% 29% 23%

The survey also found that the percentage of companies giving less than one week of severance per year of service--while still negligible--has increased significantly at all levels:

2005 2001 1998
Senior Executives (EVP, SVP or equivalent) 115% 4% N/A
Executives (VP, department head, director) 13% 4% 6%
Professionals (managers, functional staff) 16% 6% 7%
Administrative (secretarial and support staff) 15% 9% 9%

Lee Hecht Harrison Executive Vice President Bernadette Kenny said that this year's survey might show some retrenchment in severance and separation benefits given the downturn American industry weathered in recent years.

In fact, Kenny said, the survey found that only 33% of organizations changed their severance policies in the past three years, and of those, 52% indicated that they had actually become more generous. She suspects that the 48% who made their policies less generous made more dramatic changes than those who made them more generous, thus accounting for the slight decline in benefits overall.

Among the survey's other findings:

  • At the vast majority of organizations, full-time senior executives, executives, professionals and administrative employees are eligible for severance. Forty-nine percent offer severance to at least some part-time employees, up from 39% who offered severance to part-timers in 2001. Only 2% of respondents said temporary workers and/or contract workers are eligible for severance--up from less than 1% in 2001, but still negligible.
  • Organizations that do not calculate payments solely on the basis of years of service use a variety of formulas, with years of service as the most common component. Salary/grade level is a frequent component for professional and administrative employees, while title/level is slightly more frequently considered at the senior executive and executive levels.
  • Most organizations continue to set minimum and maximum severance amounts.
  • Median minimum severance has remained relatively stable since 1998 at 4 weeks for senior executives and executives, 3 weeks for professionals and 2 weeks for administrative staff.
  • Median maximum severance has increased to 52 weeks for senior executives and to 28 weeks for executives, both up from 26 weeks. Median maximum severance for the professional and administrative levels has remained at 26 weeks.
The 2005 survey was completed by 1,030 human resources executives from a representative sample of U.S.-based companies and was analyzed for Lee Hecht Harrison by the Guideline division of the New York research firm Find/SVP. It has a margin of error of +/-3%. A summary of the report, Severance and Separation Benefits: Benchmarks for Evaluating Your Policies, is posted on Lee Hecht Harrison's web site at www.LHH.com. Requests for the complete report should be made by calling 800-611-4544.
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