A short guide to severance pays

You lay off an employee and are wondering if your severance package is up to date? Here are some trends in severance pays.

Severances often vary according to the employee’s corporate ranking and usually consist of an assistance program, maintenance services, and to a smaller extent, corporate resources such as the provision of a vehicle while the employee looks for another job.

Popularity of aid programs

According to the Severance Practices Around The World study conducted by International Communications Research on behalf of Right Management, outplacement is most frequently part of aid programs offered to employees, regardless of their position.

Retirement and financial planning, professional retraining, relocation assistance and secretarial services such as faxing are other elements that may be included in assistance programs.

In Canada, officers and executives receive an average of 4.5 weeks per year of service. On the side of technicians, specialists and other employees, that number drops to about 2.5 weeks.

A majority of Canadian companies allow employees to keep their health benefits, such as health insurance, while less than half offer cash benefits allocations.

More importantly, 97% of employees who leave their jobs in Canada must sign a waiver before receiving their severances. It is an important addition to those agreements, which release the company from any possible future claims made by the employee. Keep in mind, however, that this waiver should not be seen as a way to wash one’s hands in the event of an odd-seeming layoff. The company’s reputation is, after all, at stake.


The importance of a “respectable” agreement

If you believe that once you layoff an employee, you never hear of the agreement again, you're quite simply wrong. Severance pay may be a strategy at the same level as a salary, which will allow companies to differentiate themselves from competitors in order to attract the best possible talents. So you need to harmonize your agreement with the image you want to give your business.

This exercise should not be taken lightly, not only with regards to the impact it has on individuals, but also on employees who remain in their positions as well as the company’s ability to fill its vacancies.

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