Severance packages have become standard practice across North America, with 90 per cent of organizations now offering them and 70 per cent enhancing their packages in recent years, according to a new study by talent solutions firm LHH.
The Severance & Separation Benefits 2024 Benchmarks Study, based on surveys of 500 U.S. and 200 Canadian HR leaders, found that 91 per cent of companies have reviewed their severance policies in the past two years. The trend reflects a growing emphasis on employee support and brand reputation amid increased market volatility and rapid technological change.
“Our newest study shows that severance policies are increasingly being viewed as strategic assets, as organizations are seeing the value of attracting and retaining top talent in an uncertain world of work,” said John Morgan, president of LHH’s Career Transition & Mobility and Leadership Development businesses. “By bolstering severance offerings and communicating benefits effectively, organizations are strengthening their brand reputation while reaffirming their support to both outgoing and remaining employees.”
In Canada, 65 per cent of organizations increased their severance provisions, with sectors like media and utilities seeing 88 per cent of respondents enhancing their offerings. Only 11 per cent of companies reported a decrease in the generosity of their severance packages.
The study also highlighted a rise in the use of technology in outplacement services, with 50 per cent of U.S. organizations identifying tech as a key resource—an 18-point increase since 2020. Additionally, 52 per cent of HR leaders view outplacement services as vital for organizational transformation, emphasizing the need to equip departing employees with essential skills and resources.
Communication of severance policies has become more multifaceted, with 60 to 67 per cent of companies utilizing employee handbooks, online resources, and direct communication from supervisors to ensure transparency and accessibility.
An increasing number of organizations are also considering alternatives to termination. Almost two-thirds (64 per cent) implemented a redeployment program after comparing termination and redeployment costs, a significant rise from 22 per cent in 2020. Only 14 per cent of organizations did not consider any alternatives to termination, down 21 per cent from 2020.
The findings suggest that companies are prioritizing the employee experience even during separations, recognizing the impact on their reputation and future talent acquisition efforts.
