3 Big Trends in Severance and Separation Benefits (New Data)

New data in LHH’s Severance & Separation Benefits 2024 Benchmark Study provides insights into how organizations in the US and Canada calculate, communicate, and compensate after reductions in force.

In the wake of multiple layoffs in the last few years, a company’s severance and separation policy and package are more important than ever before. Earlier this year, LHH’s research into career transition and mobility trends showed layoffs continue to be widespread and far-reaching. Involuntary terminations and career transitions are now largely an unavoidable fact of working life.

People recognize that the days of ‘a job for life’ are gone forever and they’re likely, someday, to experience an unplanned separation from an employer.

For business leaders, separation and severance policies play a key role in the business’s overall health, from recruitment and retention to public relations and the employer brand.

LHH surveyed 700 HR leaders representing 500 organizations across the US and 200 in Canada. The organizations spanned more than 15 separate sectors and a range of employee counts, from less than 100 to more than 25,000. All data has been rounded up or down to the nearest whole number. For more information regarding the methodology, see the official report.

The recently published ninth edition of LHH’s Severance & Separation Benefits 2024 Benchmark Study highlights some meaningful trends affecting organizations’ employee transition policies and packages. This article discusses three of the most striking.

Trend #1: Severance and Separation Packages Have Become More Generous

Employers are increasingly reviewing their packages – and improving them. More than 9 in every 10 employers surveyed (91%) have reviewed their separation and severance policies in the last two years. And 70% of organizations have made their severance packages more generous.

Naturally, as more organizations have considered layoffs or reorganizations to address ongoing business challenges, more have needed to review or update their policies. 

These headline figures disguise significant variance by sector, though. In the non-profit sector, (in our research, this includes education, government, and associations), only 30% of organizations across the two countries made their separation and severance packages more generous.

At the other end of the scale, 88% of companies in m edia/entertainment and utilities/public works have increased the generosity of their severance packages.

Employers, take note – as individual career paths become more non-linear and punctuated by layoffs, candidates and employees will appreciate transparency about their career transition processes and packages.

Trend #2: Increasing Formalization and Documentation

Employers are increasingly formalizing and documenting their separation and severance policies and formulas. This year, only 3% of employers across both countries said they had no written documentation about their separation and severance policies. This confirms a long-term downward trend from 30% of US organizations in 2017 to 16% in 2020.

Where some companies may have preferred to handle it on a case-by-case basis or had simply put it off, the recent economic climate and potential for poor publicity helped them take action.

Among the smallest companies surveyed (i.e., those with fewer than 100 employees), 5% had no relevant written documentation in place. Conversely, no respondents with over 10,000 employees said they had no documentation.

Setting calculation standards follows suit

Standardized formulas for calculating severance are also becoming more popular. The percentage of companies reporting they had no set formula in place fell by 10 percentage points since the US data collected in 2020, to reach a new low of just 4%.

Employers with well-documented severance policies and clearly defined formulas will find that they can talk reassuringly to prospective talent about their long-term futures. But they also gain an advantage in retention, as their people may no longer feel compelled to immediately start looking elsewhere during difficult periods for the company or broader economic headwinds.

Related: Why Competitive Severance Pay is Critical to Employer Brands

Trend #3: Tech-driven Outplacements

Outplacement services are increasingly valued and tech-driven. When respondents were asked to rank the importance of a series of benefits of outplacement programs, each achieved an average score above four on a five-point scale. Each also achieved a higher score than in 2020.

This shows employers’ understanding of the benefits of outplacements is simultaneously deepening and widening.

Organizations are also placing greater importance on the role of tech in outplacement programs. When asked to describe their organization’s philosophy on outplacements, 46% of US organizations agreed ‘technology is the most important resource in our outplacement programs.’ This was a rise of 22 percentage points since 2020.

In-person touch points such as seminars and meetings were prioritized by 32% of respondents, and 22% favored a blend of the two.

Across our research, the United States and Canada were closely aligned on most answers although they varied in this respect. Just 31% of Canadian respondents agreed technology was the most important resource, while 42% prioritized in-person meetings, seminars, and coaching.

Given the powerful role technology can play in outplacements – from defining and monitoring metrics to providing access to skilling, training, and employment opportunities and everything in between – LHH expects this gap to narrow in the coming years. Our research proves technology has become increasingly central to outplacements since 2020, a trend that looks set to continue.

LHH is a leader in career transition and outplacement services, helping nearly 1.4 million individuals transition to new roles over the last three years. Programs include a combination of empathetic, experienced coaches and loads of resources, including a new tool called LHH Career Canvas.

Statistically, more than 91% of candidates secure new positions within six months. If you’re in HR, procurement, or an executive leader charged with securing outplacement services for your employees, let’s talk.

What’s Next for Severance and Separation Benefits?

For employers and HR teams, the situation of separation and severance is increasingly worrisome. A single employee’s negative layoff experience can quickly go viral online, instantly undoing an organization’s careful nurturing of their employer brand. Negative impacts ripple across engagement, retention, the organization’s culture, and even future recruitment.

Related: Severance Package Costs & Liabilities: What C-Suites Need to Know Now

Employers are adapting well to this challenge. They increasingly recognize well-documented, generous, and respectful approaches to separation are wins for employer and worker alike. Now 84% of US respondents say it is somewhat or very important to prepare employees for a career transition before separation occurs, up 25 percentage points since 2020.

They also understand formal, documented policies give workers the space to be optimistic and enthusiastic about the organization and their role in it.

To make sure their organization continues to be seen as an attractive place to work, employers should make use of internal surveys and tools like this benchmarks study. They should compare their separation and severance packages to those offered by similar companies (i.e., those of similar size and in the same sector or related sectors).

Organizations that want to establish themselves as the premier workplace in their sector will, naturally, have to offer better packages than their competition. But to determine what “better” means in your sector, you need to know what others are offering – whether that’s a generous financial settlement or unparalleled career-transition and outplacement support.

How do your organization’s separation and severance policies and packages compare with the competition?

Download LHH’s Severance & Separation Benefits 2024 Benchmarks Report.