Related Posts
Conversation Starter
Layoffs at Walmart corporate 😬😬
Conversation Starter
More Posts
Conversation Starter
Pro
Best mentoring advice you were given?
Additional Posts in Accounting
What are some good personal finance books?
Which one of you wrote this? The feels...
How do I get Spotify to work in the EY office?
New to Fishbowl?
Download the Fishbowl app to
unlock all discussions on Fishbowl.
unlock all discussions on Fishbowl.
Even when terminating someone (unless for cause), you want to treat them with respect. When you are terminating people because of lack of work, you want to do what you can to help cushion the blow. It's not the staffs fault that they are being terminated. Also, this former employee will likely be a client someday, and reality is that a reasonable severance package helps prevent ill-will.
To cover this in the 5 year old sense: We are at a pizza party, but it is time to leave. You can take one slice of pizza and one piece of cake with you. No complaining later because I still have some pizza and cake. They didn’t have to send you home with anything, but it helped to get everybody out the door easier.
But what if the person hosting the pizza party wanted leftovers for lunch later? What if we thought it would be a 3 hour pizza party and I'm being asked to leave after 1 hour?
What I was trying to get at is I'm getting more jaded about companies wanting to ✨️do the right thing and treat people humanely✨️. There has to be something for their bottom line. I think the responses of not wanting to make customers think they're out of cash, the flight risk of people left behind, and former employees being clients are the answers I am looking for
Many require you to sign an agreement not to sue
I think if you have a no compete clause, they typically buy out your time. It's also how they keep you off their unemployment, which would make their rates go up.
Rising Star
Public accounting does it because we are all future clients once we get canned. If they treat us well, we might hire the firm in the future.
Public accounting is a small world and todays laid off associate is tomorrows F500 VP of tax you want to win work with.
My employment contract requires my company to either give me a 3 month notice if they are terminating my employment (other than for cause) or to provide 3 months severance.
Often when people have a career they build a life around that career. So if something happens their life can be upheaved. In order to get people to choose to work for the company in the first place they agree to provide this transition period if things don’t work out. It’s a safety net. I have to agree to other provisions in the contract (non-solicitation, mediation, etc) so we both get something but having a severance package as part of a contract is normal for more senior level positions.
Some but not even the most important reasons were covered:
1) To signal to people left behind you’ll take care if them if you have to get rid of them so they don’t all leave.
2) Reputation for new hires. Again you show them you’ll take care if terminations happen.
3) Most leaders do actually understand the impact of laying off people to the human beings they are impacting. They want to treat those people well.
4) Signal to customers/vendors you aren’t bankrupt. Laying off with no severance screams you are out of cash, and you don’t want to freak anyone out.
It also eases their conscience. Quite often I see money as the reason for the lay off. The partner/firms are all trying to spend less so they can make more. Moves such as hiring more seasonal staff so no commitments benefits or pensions.
You typically sign a document saying you won't sue them if you take the severance, which is why they provide it. Also partially goodwill toward the employees / PR for the company that they aren't that stingy, towards their own people imagine how stingy they are with their product/ service.
Depends on jurisdiction. Sometimes severance is 'pay in lieu of notice'; either statute or the contract requires the employer to provide notice before termination. Standard notice period in the UK is 3 months, which seems very high to Americans.
Sometimes, severance pay is also negotiated as part of an employment contract. Not a bad perk to secure for yourself. Companies usually have to pay out accrued unused annual leave as well.
Why do you give two weeks notice when you quit?
I think a lot of peeps were laid off, no fault of their own, I was given a generous severance and will always be grateful for that, so were my other peeps laid off. I worked their 23 years, gave them my best, they knew that. If you get that, yes you will be sad, but they are honoring you, generally was not your immediate bosses decision, came from higher up. I worked for a great company. I am happy they have acknowledged what I have done for them. They gave me much more time instead of throwing me out to the street. As far as I am concerned, they cared about all of us. I know not all companies are that way, but mine was, no ill will from me.
While that is a beautiful example, I am becoming more trusting of companies doing the right thing without there being some benefit to the company
My understanding is that people often waive the right to sure (think 'wrongful termination') in exchange for the $.
Someone who knows more about this topic should pile on.
A severance package is (generally) a contract between a departed employee and employer. For a contract to be legally binding, their must be “consideration”. The employer will structure this consideration dependent on the employee. For example if a high-level sales executive decides to retire, the employer will give them 8-12 months of severance in exchange of a non-compete for 2 years. As mentioned above, it could be an agreement to go to arbitration or based on past performance.
“(When fired, not the phenomenal tv series)”. That explains the request to have it put in terms of a 5 year old.
The TV series Severence is phenominal!
A minimum severance is stipulated by law. Usually about a weeks pay for each year of employment. The additional amount a company pays is to avoid an unlawful termination lawsuit. The fired employee releases the company from any future liability in exchange for the severance package. Even if the employee has no actionable case, it’s often much cheaper to pay.
If you’re located in the US, it’s pretty rare that severance is required or stipulated by law.
It’s customary and requires signing a release that protects the employer from anti-discrimination lawsuits, but it’s rarely legally required.
We are a small company and have offered severance agreements. We did it partially because we felt bad for letting go of someone, but the other reason is to avoid trying to defend a lawsuit, which can take time and money. We offered it to one person and they turned us down, determined to sue us, but we never heard back from them, probably because the attorneys they contacted told them that they didn't have a case, so they missed out on the severance and didn't sue.
With severance companies protect their butt, get you sign an agreement where yoi waive the right to sue them for discrimination or other stuff.
Buying good will, It may prevent the brand from being damaged by a disgruntled former employee who was simply caught in the crosshairs of a cost savings initiative. Sounds contradictory, but you have to think of the long game.
So you can’t sue them for their wrong-doings and unfair treatment. I know this from experience..
A lot of the reason to give severance is to avoid lawsuits. Also keep some goodwill with the employee(s) that are let go, and keep remaining employees from feeling too alarmed that the same could happen to them.
But also the employer likely has some responsibility in most terminations that are not for cause. If it’s purely due to the economy, maybe they could have had more cash reserved, or not gone on a hiring spree recently. Or none of it was in their control but they do have some sympathy.
But if it’s just one person who is not a good fit for the role they’re in? The employer wrote the job posting, did the hiring selection, onboarded, trained, managed, and maybe even promoted that person. So if they end up with an employee not capable of filling the role the way the employer wants it… whose fault is that?
Let’s say a company needed someone with 5-7 years of experience, asked for 3-5 because that’s what they wanted to pay, and hired someone with 2 years of experience because they were smart and a quick learner. But really, they need someone with 5-7, and that hire can’t develop 3 years of experience in 3 months. Do they deserve to get kicked to the curb with nothing? I think not. And a lot of employers know that at some level, they have some responsibility here too.