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Executives Still Getting Good Severance Pay

Survey shows average executive gets four weeks of pay for every year of service. U.S. companies least generous of all.
Lisa YoonJanuary 29, 2003

According to a new survey by Right Management Consultants, severance pay for top executives remans fairly generous. On average, executives receive four or five weeks per year of service.

Half of the companies in the Global Severance Practices Survey, a worldwide survey of nearly 1,500 companies in 32 countries, said severance packages only comprise recompense for years of service. Of those who extend the package beyond cash, the most common benefit to departing top executives was continued medical benefits (66 percent). That was followed by outplacement services (58 percent) and continuation of life insurance (31 percent).

About one out of every five of the respondents said their company offers other perks such as financial planning, retirement planning, secretarial support, or use of office space. For instance, 21 percent continue paying bonuses to departing execs; 16 percent offer office space.

Just under half of departing executives get one month (26 percent) or more (22 percent) in severance per year of service. Another 12 percent receive an additional amount equal to the age difference, if there over 50.

Of more modest packages, 22 percent receive one week’s worth of severance per year served, and 22 percent receive two weeks’ worth of severance.

Interestingly, U.S. companies are among the least generous to departing executives, according to the survey: only about 12 percent of U.S. employers give a month or more of severance pay per year served. By contrast, more than half of Canadian companies, 36 percent of Brazilian, and a third of French employers give departing senior executives at least a month in severance pay per year of service.

In addition to severance pay, many companies also offer laid-off employees outplacement service — that is, help finding a new job. The reason for this beneficence? Because it’s the right thing to do, according to 83 percent of the respondents.

Seventy-seven percent said offering outplacement sent a positive signal to remaining employees. One of the signals sent: please don’t sue us. Indeed, more than half of companies surveyed said outplacement helped reduce the cost of litigation and was good for the company’s image. And 48 percent said outplacement provided older employees with special career transition assistance.

The survey included one more curious finding: only about half of all respondents said their company had formal, written severance policies. Thirty-four percent said they had informal policies, and 15 percent reported having no policy at all. In the U. S., 58 percent of respondents said their companies had a formal policy regarding severance benefits.

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