During the current economic downturn, employers are paying increased attention to outplacement and severance for departing employees, according to a report released March 30 by Human Resources consulting firm Lee Hecht Harrison in Woodcliff Lake, N.J.
“There is a strong correlation between how a company treats departing employees and its ability to attract and retain top talent now and in the future, particularly when the economy rebounds,” Barbara Barra, executive vice president of operations for LHH, said in a statement announcing release of the 2008-2009 Severance & Separation Practices Benchmark Study. “Providing a socially responsible and compassionate career transition service is more than the right thing to do, it's the smart thing to do.”
The study was based on responses from 1,072 human resources executives. This is the fifth edition of the study, which previously was conducted in 1995, 1998, 2001, and 2005.
The report found that despite recent cost cutting, 65% of companies have maintained their severance policies, and 19% have made them “more generous.” “This finding is validation that severance is an important investment for companies that can withstand economic pressures,” the report said.
In addition, more employers are offering outplacement assistance as a solution to preserve their employer brand and reputation, according to the report. In 2001, 53% of companies offered outplacement services to all officers and all senior executives, compared with 67% in the latest report. In 2005, 39% offered outplacement services to all exempt employees, compared with 55% in the most recent report.
The study identified several trends related to employee separations.
First, it said, companies are placing more emphasis on redeploying workers affected by a reduction in force than in the past. Twenty-eight percent of respondents (versus 22% in the 2005 survey) said they had compared the cost of terminating employees with the cost of employing them elsewhere in the firm, and chose redeployment.
Companies increasingly are using redeployment because of the pressure to improve retention, keep highly trained employees, and reduce turnover costs in the long run, the report found. It cited one respondent, a high-tech firm, that has a goal of retaining 90% or more of its workforce scheduled for separation.
“They conclude that to do otherwise is to, in effect, serve as a training ground for their competitors,” the report said. Second, the report found that despite the world's dependence on computers, the need for human interaction has not been supplanted.
Asked about their “philosophy” regarding outplacement, 82% of companies said they believe assistance should be provided in a blend of technology and in-person resources. Seventeen percent said they relied on in-person meetings, seminars, and coaching, while only 1% reported using technology with no interpersonal connection.
Third, the study found that despite much media attention on the importance of retaining older workers, employees over 55 had fewer opportunities according to the latest survey than they did according to the 2005 survey to reduce their work hours (54% versus 85% of organizations offered this option).
Fourth, the report found that only 31% of companies have “change of control” policies—meaning advance agreements between a company and some of its employees, usually executives, about what the individual's compensation and benefits will be in the event of a merger or other such event. This question was not asked on previous surveys. It is another area in which companies need to do a better job, according to the report.
Reprinted with permission from BNA