Exit Packages Global Trend

Ifeoma Obi / Posted On: 7 October 2020 / Updated On: 30 November 2022 / Other / 1,350

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Exit Packages Global Trend



According to Pattinson Brewer Solicitors (2020), the term ‘exit package’ is used to describe the terms under which someone agrees to leave their job.  They say that typically, an employer who is willing to agree on an exit package with you will want you to enter into a legally binding Settlement Agreement waiving your right to take any future legal action against them.

 

A good exit package can protect your professional reputation, provide you with a financial cushion while you look for new employment, guarantee a good reference, and avoid the uncertainty of litigation. It is important to note that if you are offered an exit package, you are not under any obligation to accept it. If the terms are reasonable and the compensation offered is in line with what you might reasonably expect to recover through litigation, it is always worth sensible consideration (Pattinson Brewer Solicitors, 2020).

 

Observations from the research on exit packages (also known as severance packages) worldwide carried out by Right Management Manpower group (2014) show that:

 

Across all regions, severance and termination policies are frequently governed by a combination of company policy and local/national law (52%). In the event of an employee contract termination, most companies (62%) are required by law to give a certain amount of advance notification to the employee. Three out of four of those surveyed (75%) said their company had a formal, written severance policy. Eligibility for severance differs around the world and one-third (33%) of participating companies require a year or more employment for employees to qualify for severance benefits.

 

Regarding Severance Calculation, top executives earn the most severance per year of service no matter whether voluntarily separated (3.53 weeks per year) or involuntarily separated (3.48 weeks per year). Regardless of position or type of separation, severance is most frequently offered as a lump sum payment. More than half (55%) of the companies surveyed put a cap on severance calculations.

 

Regarding the benefits, regardless of employment level, the most common benefits included in a severance package are assistance programs (outplacement and financial planning), continued benefits (healthcare and financial compensation), and to a lesser extent, company resources (office space or car). Sixty-six percent of terminated employees are required to sign a waiver before they can access severance benefits.

 

Regarding the role of outplacement, although not legally required, most companies (68%) provide outplacement services. A majority of employers (60%) reported they offer outplacement instead of monetary benefits. As few as 35% of employers offer cash in place of outplacement, and the remaining 5% did not know what their organization’s policy was on this issue.

 

Scates (2019) states that according to the findings of RiseSmart’s 2019 Guide to Severance and Workforce Transition there has been an increase in redeployment as an alternative to layoffs and voluntary exits. More companies are offering severance benefits to all employees. There is a trend of the inclusion of non-exempt, hourly, employees in outplacement services. The companies they surveyed offered these top six reasons for offering severance to displaced employees:

  • To project an ‘employee-first’ company culture
  • To take care of employees
  • To protect brand reputation
  • To limit company liability
  • To recruit talent
  • To maintain an ongoing employer/employee relationship

 

Related: What to say in an exit interview: A guide for departing employees


Scates (2019)  suggests the following recommendations for improving severance policies and retention programs. Establish uniform eligibility policies that include more people. As employment tenures are naturally shorter, only considering employees with a tenure of 5 years or more is no longer practicable. Companies who continue to view employees with a shorter term at the organization as less deserving of an equitable solution when positions are eliminated are missing an opportunity to garner loyalty and the possibility of an employee’s return when appropriate positions open up again. As boomeranging (returning to a company after a tenure outside of the organization) becomes more common among talented employees and more accepted within organizations, offering fair severance packages to all exiting employees is an investment in the future success of an organization.

 

Offer outplacement as a standard element of severance. Just as severance policies have continued to evolve, so has the outplacement market. If you have not reviewed your current outplacement provider recently, now might be a good time. If your outplacement partner is still operating with the same models established 50 years ago, it may be time to consider a more contemporary solution that includes 24/7 connection and mobile accessibility that match the way job search is conducted today.

 

Provide effective redeployment programs. Organizations providing internal redeployment programs on their own identified the following five top areas for improvement:

  • Effectively matching employees to open positions
  • Providing resume support
  • Providing career coaching
  • Partnering with an outside consultant
  • Having job search-related webinars

 

Proactively protect your employer brand. More HR leaders should monitor employer review sites and social media for negative reviews. While that number has improved significantly, today 32 percent of organizations still do not have programs in place to protect and improve the employer brand which begins with reviews.

 

The first phase to creating a name that attracts new workers while engaging and maintaining those that stay is recognizing the value of the employer brand in any economic climate. The second step is to develop a strategy to ensure that each employee is treated equally at any point in their involvement with the company, and the final step is to have systems in place that promote organizational and employee objectives.

 

References

  1. Pattinson Brewer Solicitor (2020). https://pattinsonbrewer.co.uk/employment/exit-packages/. [online] Pattinson Brewer. Available at: https://pattinsonbrewer.co.uk/employment/exit-packages/.
  2. Right Management Manpower Group (2014). Severance Practices Around the World Executive Overview. [online] Available at: https://www.manpowergroup.com/wcm/connect/1537631a-4d15-42ad-8fd1-d005992e043f/RM_Severance_Whitepaper.pdf?MOD=AJPERES&CVID=kP [Accessed 7 Oct. 2020].
  3. Scates, K. (2019). Severance Policies Reflect Current Employment Trends | Randstad Risesmart. [online] www.randstadrisesmart.com. Available at: http://randstadrisesmart.com/blog/severance-policies-reflect-current-employment-trends [Accessed 7 Oct. 2020].

Ifeoma is a Business Analytics and Research Consultant at Industrial Psychology Consultants (Pvt) Ltd, a business management and human resources consulting firm.

LinkedIn: https://www.linkedin.com/in/ifeoma-obi-92b4b9121/

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Ifeoma Obi
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