Just about everyone out there knows someone -- or at least knows someone who knows someone -- who was laid off, downsized or fired or whose company disappeared during the last few years. And it seems that most of us assume that those friends or friends of friends (or ourselves) received a little padding on the way out, whether in the form of severance pay or even just outplacement help.
But here's what may come as a surprise to many people: Severance pay is not a legal requirement. It's nice, it's smart, it can be helpful to the company that offers it. But it is not necessary for an employer to provide a departing employee with any assistance.
That is what an employee in Bethesda found out when she was laid off in September from a small advertising agency. She had been with the company for about five years and was downsized after a few rounds of layoffs that preceded hers. She had been told not to expect to be let go, so she was taken by surprise when she was informed she had one week left. And nothing but her memories to take with her.
A lot of companies go through downsizing. It's not unusual. The advertising agency employee -- who asked not to be identified because she is still looking for work and needs a good reference -- understands that businesses need to save money. But to go from stellar employee to "I'm sorry, you have a week left" is far from easy to take. Particularly when there is no help as the worker's life is turned upside down.
But are employees expecting too much when they assume they will get a parting gift with their unemployment notice?
Not really, said Kathy Albarado, president of HRConcepts LLC, based in Herndon. Although the employer is not required to offer anything, "it is a common practice," she said. "They typically muster something up."
Why a company would offer nothing at all could range from having no money to "being shortsighted and thinking, 'We'd save money on this,' " said Betsy Friedlander, principal with Willmott and Associates, a human resources consulting firm in the D.C. area. "Small firms are obviously not working with the big bucks, so they can't do what other companies do."
But even a little action will go a long way, Friedlander said. "To come in and help [fired employees] with resumes doesn't cost a lot of money."
Withholding severance can be bad for public relations, and it can leave the company vulnerable to lawsuits. Usually when an employer provides a severance, it does so with a "separation agreement," Albarado said. That agreement basically protects the employer; it usually says that employees will not bring suit against the company for unfair firing. The employee signs the agreement, then receives a severance payment or benefits.
Layoffs sans severance are more common among smaller employers. But even they presumably can cobble together some sort of budget for outplacement support, Albarado said. "A lot of community services are already paid for by tax dollars," she pointed out. She suggests clients consider at least setting up a resource center for employees. A state employment agency can send a representative to the office, help workers file for unemployment claims and point them where to go next to start looking for a job. That sort of service should not cost an employer anything.
If the employer does at least help with some outplacement assistance, that can help the company as well.
"Obviously for the remaining employees, [a big layoff] impacts morale, lowers productivity. Other employees are concerned and looking over their shoulders, wondering when the next round of layoffs is going to occur," Albarado said. "If [the company is] not upfront, employees feel they are not being treated with honesty. Employees would rather hear bad news than no news at all."
That was the case at the small advertising firm in Bethesda. Before the woman interviewed for this column was let go, there was much murmuring about what would happen next, who would be laid off next, even rumors that executives were getting raises while lower-level employees were being let go. Those who remained at the company are now looking over their shoulders, feeling easily expendable.
"Companies don't realize their productivity and morale is going to drop in the long run," Friedlander said. "People see how the company leaves them with nothing, and they just look out for themselves."
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