Preparing for Layoffs: Drake Beam Morin Provides Tips for Employees and Employers On Creating Equitable Severance Packages

Apr 11, 2001, 01:00 ET from Drake Beam Morin

    BOSTON, April 11 /PRNewswire/ -- With the U.S. unemployment statistics
 reaching a 20-month high of 4.3 percent, employers and employees should
 prepare for the uncertain future. Global workplace consulting firm Drake Beam
 Morin (DBM) advises individuals and managers to know their rights when it
 comes to severance.
     "In today's state of economic uncertainty, most people are not losing
 their jobs through any fault of their own; rather, layoffs are based on
 business decisions to maintain profitability and competitiveness," said Thomas
 Silveri, president and chief executive officer of DBM. "Employees and
 employers should be informed of the components of an equitable severance
 package, in the event that they are involved in a layoff."
     Severance is intended to bridge the gap between one job and the next.
 According to Bill Hollett, senior vice president and an expert in severance
 consulting with DBM, "The two most significant factors in the length of time
 this takes are the age of the individual and his/her salary level, not the
 length of service, which most companies use to create a severance policy."
 Including age and pay level in the overall formula creates a more equitable
 policy. Nevertheless, on average, companies provide between one and two weeks
 pay for each year of service unless the employee has a negotiated employment
 contract or is at a senior level.
     A good rule of thumb for employees is to not sign a severance agreement
 until they've had ample time to think it over and do some research to be sure
 the package is reasonable. Generally, an attorney's services are not needed in
 severance negotiations; however, most companies encourage an employee to
 review a separation agreement with a lawyer. DBM recommends that throughout
 negotiations both parties remember that the best severance agreements are
 those that are mutually beneficial to the employer and the employee.
     DBM has worked with thousands of companies to create equitable severance
 packages. Based on its more than 30 years of experience, DBM has identified
 the following seven items that are typical components in severance packages:
 
     1.  Severance Pay - Although they are not legally bound to do so
         (unless by an employment contract or union agreement), most companies
         will provide severance pay to bridge the gap between jobs.
 
     2.  Outplacement - Approximately 80% of employers in the U.S. provide
         outplacement services to laid-off employees.
 
     3.  Medical Insurance - Employers must, according to law, offer employees
         COBRA coverage for 18 months after they have left the organization.
         There is a period of time before COBRA coverage becomes available to
         employees; however, many employers continue company coverage through
         the period of severance before it becomes available.
 
     4.  Vacation Pay - If a company allows its employees to accrue vacation
         time from one year to the next, employees who have been laid off
         should remember to account for their unused and accrued vacation time.
 
     5.  Bridging to Retirement - Companies are often willing to grant time for
         bridging to retirement if an employee is within a few years of
         eligibility for either early or normal (full) retirement. This is
         usually in the form of adding years to age and service - Eg. 3 + 3
         (three years added to age, three years to service). If the company
         pension plan is funded, this costs little for a company to give.
 
     6.  Stock Options - Generally, departing employees have 90 days after
         they've been laid off to exercise vested stock options before they are
         lost. Employees can negotiate, however, to have this period extended
         and even have unvested options become exercisable.
 
     7.  Noncompete Agreements - If employees are asked to sign one of these,
         they should not sign it immediately. This is a case where it is best
         to consult with an attorney.
 
     In addition, here is a list of other benefits that might be included in a
 severance package:
 
     Long-term disability                      Temporary disability
     Life insurance conversion privileges      Long-term care
     Accidental death and dismemberment        401K plan conversion
     Employee loan                             Employee Assistance Plan (EAP)
     Tuition refund plan                       Relocation
 
     "Being aware of what is usually found in a severance package can give both
 the employee and the employer leverage at the negotiating table. A clear
 understanding of what is reasonable and acceptable in an equitable severance
 agreement helps to prepare for the uncertainties of the future," said Hollett.
 
     Drake Beam Morin is the worldwide leader in providing strategic solutions
 that help organizations align their workforces to meet changing business
 needs. Known for over 30 years for its innovative and effective career
 transition services, Drake Beam Morin provides services in employee selection,
 development, retention, and transition. Drake Beam Morin now has more than 200
 offices in over 40 countries. Visit Drake Beam Morin at http://www.dbm.com.
 
     Contact:  Shari Fryer / Drake Beam Morin
               203-961-7786; shari_fryer@dbm.com
 
               Rachel Leung / Earle Palmer Brown
               203-705-9233; rleung@epb.com
 
 

SOURCE Drake Beam Morin
    BOSTON, April 11 /PRNewswire/ -- With the U.S. unemployment statistics
 reaching a 20-month high of 4.3 percent, employers and employees should
 prepare for the uncertain future. Global workplace consulting firm Drake Beam
 Morin (DBM) advises individuals and managers to know their rights when it
 comes to severance.
     "In today's state of economic uncertainty, most people are not losing
 their jobs through any fault of their own; rather, layoffs are based on
 business decisions to maintain profitability and competitiveness," said Thomas
 Silveri, president and chief executive officer of DBM. "Employees and
 employers should be informed of the components of an equitable severance
 package, in the event that they are involved in a layoff."
     Severance is intended to bridge the gap between one job and the next.
 According to Bill Hollett, senior vice president and an expert in severance
 consulting with DBM, "The two most significant factors in the length of time
 this takes are the age of the individual and his/her salary level, not the
 length of service, which most companies use to create a severance policy."
 Including age and pay level in the overall formula creates a more equitable
 policy. Nevertheless, on average, companies provide between one and two weeks
 pay for each year of service unless the employee has a negotiated employment
 contract or is at a senior level.
     A good rule of thumb for employees is to not sign a severance agreement
 until they've had ample time to think it over and do some research to be sure
 the package is reasonable. Generally, an attorney's services are not needed in
 severance negotiations; however, most companies encourage an employee to
 review a separation agreement with a lawyer. DBM recommends that throughout
 negotiations both parties remember that the best severance agreements are
 those that are mutually beneficial to the employer and the employee.
     DBM has worked with thousands of companies to create equitable severance
 packages. Based on its more than 30 years of experience, DBM has identified
 the following seven items that are typical components in severance packages:
 
     1.  Severance Pay - Although they are not legally bound to do so
         (unless by an employment contract or union agreement), most companies
         will provide severance pay to bridge the gap between jobs.
 
     2.  Outplacement - Approximately 80% of employers in the U.S. provide
         outplacement services to laid-off employees.
 
     3.  Medical Insurance - Employers must, according to law, offer employees
         COBRA coverage for 18 months after they have left the organization.
         There is a period of time before COBRA coverage becomes available to
         employees; however, many employers continue company coverage through
         the period of severance before it becomes available.
 
     4.  Vacation Pay - If a company allows its employees to accrue vacation
         time from one year to the next, employees who have been laid off
         should remember to account for their unused and accrued vacation time.
 
     5.  Bridging to Retirement - Companies are often willing to grant time for
         bridging to retirement if an employee is within a few years of
         eligibility for either early or normal (full) retirement. This is
         usually in the form of adding years to age and service - Eg. 3 + 3
         (three years added to age, three years to service). If the company
         pension plan is funded, this costs little for a company to give.
 
     6.  Stock Options - Generally, departing employees have 90 days after
         they've been laid off to exercise vested stock options before they are
         lost. Employees can negotiate, however, to have this period extended
         and even have unvested options become exercisable.
 
     7.  Noncompete Agreements - If employees are asked to sign one of these,
         they should not sign it immediately. This is a case where it is best
         to consult with an attorney.
 
     In addition, here is a list of other benefits that might be included in a
 severance package:
 
     Long-term disability                      Temporary disability
     Life insurance conversion privileges      Long-term care
     Accidental death and dismemberment        401K plan conversion
     Employee loan                             Employee Assistance Plan (EAP)
     Tuition refund plan                       Relocation
 
     "Being aware of what is usually found in a severance package can give both
 the employee and the employer leverage at the negotiating table. A clear
 understanding of what is reasonable and acceptable in an equitable severance
 agreement helps to prepare for the uncertainties of the future," said Hollett.
 
     Drake Beam Morin is the worldwide leader in providing strategic solutions
 that help organizations align their workforces to meet changing business
 needs. Known for over 30 years for its innovative and effective career
 transition services, Drake Beam Morin provides services in employee selection,
 development, retention, and transition. Drake Beam Morin now has more than 200
 offices in over 40 countries. Visit Drake Beam Morin at http://www.dbm.com.
 
     Contact:  Shari Fryer / Drake Beam Morin
               203-961-7786; shari_fryer@dbm.com
 
               Rachel Leung / Earle Palmer Brown
               203-705-9233; rleung@epb.com
 
 SOURCE  Drake Beam Morin