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SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ What's my company score?
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© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 2
INTRODUCTIONParting is such sweet sorrow, but it can be a whole lot sweeter when both sides walk away amicably. Although no one looks forward to terminations, layoffs, or other forms of employee departure, most organizations recognize that a severance package can do a lot of good for all parties. For employers, severance pay policies can boost their employment brand, provide some protection against wrongful termination suits, and encourage former employees to return to the organization should the opportunity arise. For employees, the benefits are obvious: severance pay acts as a parachute to help cushion their re-entry to the job market.
Be that as it may, there is more than one way to construct aseverance policy. Human resources (HR) professionals knowthat not all employees are eligible for the same benefits, andseverance pay is no exception. Given the fraught nerves andraw emotion that often surround employee terminations, it isimperative that HR professionals have a well-articulated andfirmly grounded policy to guide them through the severancepay process. Notably, this is important for both the executorand recipient of severance pay: for HR professionals, becauseit allows them to rely on predetermined formulas and policiesduring these difficult discussions, and for employees, because itgrants them peace of mind that they are being treated fairly.
DO YOUR RESEARCH BEFORE CREATING A POLICYSeverance pay policies are similar to other HR programs, inthat many factors contribute to determining the right solution.While HR professionals always should be conscious of theircompetitors’ behavior, it is paramount that your organization isaware of the legal and regulatory statutes surrounding noticeperiods and severance pay in your markets. These rules, whichare often dictated by collective bargaining action and laborcodes, should underpin your organization’s severance policy,and are particularly rigid surrounding aspects of terminationlike notice periods, pay in lieu of notice, and the justification fordismissal. HR and legal teams should keep an astute eye out forupdates or changes in local ordinances, as noncompliance cancost considerably more than providing the proper benefits onthe front end.
PAYMENT FORMULA
NOTICE PERIODSEVERANCE PAY POLICY
SEVERANCE PAYMENTS
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 3
INDUSTRY SCORECARDThis scorecard is the ultimate measuring stick of your company’s severance pay policy, allowing you to compare your policy against 10 industry standards. In order to break down and evaluate your organization’s policies, the scorecard identifies four policy areas (quadrants) that are integral to a holistic severance pay program. The four quadrants are:
Each quadrant includes questions pertaining to its policy area, and each question has an assigned point value that is commensurate with its relevance to the ideal severance pay policy. When completing the scorecard, use your company’s point total for each quadrant to identify the specific areas in which your severance pay policy excels or falls behind. Users can also compare their quadrant scores to those of 10 global industries.
This quadrant looks at employee eligibility to receive a payout, how a payout might impact the ability to return to work for a company later, and the conditions of accepting a severance payment.
Severance Payments may include a variety of components. This quadrant addresses what is included in the final payment such as accrued sick leave, annual leave and/or commissions.
This quadrant explores how much notice is provided to employees as well as any options the employee has during this notice period.
This quadrant looks at the foundation of the severance pay calculation and whether amounts are based on years of service or if the age of the employee is a factor.
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 4
WHAT’S MY COMPANY’S SCORE?This scorecard is more than a report on global industry findings; it’s an opportunity to see how your company’s severance pay policy stacks up! Review and answer the questions on the following pages to calculate your own company’s score. For each question, select the response that best describes your company’s policy.
Note: Some questions allow for more than one response.
After completing all the questions in each quadrant, use the table on page 10 to review your company’s score and compare your quadrant and overall results to 10 global industries.
INDUSTRY SCORECARD
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 5
SEVERANCE PAY POLICY
1. WHICH TYPES OF EMPLOYEES ARE COVERED IN YOUR COMPANY’S SEVERANCE PAY POLICY? CHOOSE ALL OPTIONS THAT APPLY.
NONEXEMPT EMPLOYEES
EXEMPT EMPLOYEESFULL-TIME EMPLOYEES
PART-TIME EMPLOYEES
CONTRACTORS/TEMPORARY EMPLOYEES
4. HOW LONG DOES AN EMPLOYEE HAVE TO WAIT BEFORE RETURNING TO THE COMPANY AFTER RECEIVING A SEVERANCE PAYOUT? CHOOSE ONE OPTION.
NO MINIMUM
A MINIMUM OF 3 MONTHS
A MINIMUM OF 6 MONTHS
A MINIMUM OF 12 MONTHS
A MINIMUM OF 18 MONTHS
2. WHICH IS THE MINIMUM LENGTH OF SERVICE REQUIRED FOR ELIGIBILITY IN YOUR COMPANY’S SEVERANCE PAY POLICY? CHOOSE ONE OPTION.
A MINIMUM OF 6 MONTHS
A MINIMUM OF 12 MONTHSNO MINIMUM
A MINIMUM OF 3 MONTHS A MINIMUM OF 18 MONTHS
YES
NO
3. ARE EMPLOYEES ALLOWED TO RETURN TO THE COMPANY AFTER RECEIVING A SEVERANCE PAYOUT? CHOOSE ONE OPTION.
INDUSTRY SCORECARD
SEVERANCE PAY POLICY
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 6
5. IS THE EMPLOYEE’S PREVIOUS SERVICE PERIOD RECOGNIZED IF THEY RETURN TO THE COMPANY AFTER RECEIVING A SEVERANCE PAYOUT? CHOOSE ONE OPTION.
YES, FOR ALL OR THE MAJORITY OF EMPLOYEES
YES, ON A CASE-BY-CASE BASIS
NO
6. WHAT IS THE MAXIMUM PERIOD OF ABSENCE ALLOWED FOR AN EMPLOYEE’S PREVIOUS SERVICE TO BE RECOGNIZED? CHOOSE ONE OPTION.
A MAXIMUM OF 18 MONTHS
A MAXIMUM OF 3 MONTHS
A MAXIMUM OF 6 MONTHS
A MAXIMUM OF 12 MONTHS
A MAXIMUM OF 24 MONTHS
MORE THAN 24 MONTHS
NO MAXIMUM
INDUSTRY SCORECARD
8. ARE EMPLOYEES ALLOWED TO RETURN TO THE COMPANY AFTER RECEIVING A SEVERANCE PAYOUT? CHOOSE ONE OPTION.
YES, FOR ALL OR THE MAJORITY OF EMPLOYEES
NO
YES, ON A CASE-BY-CASE BASIS
7. WHICH OF THE FOLLOWING CONDITIONS DO COMPANIES INCLUDE IN SEVERANCE PAYOUT AGREEMENTS? CHOOSE ALL OPTIONS THAT APPLY.
NONCOMPETE
NONSOLICITATION
NONDISCLOSURE
NONPOACHING
NONDISPARAGEMENT
NOTICE PERIODNOTICE PERIOD
INDUSTRY SCORECARD
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 7
9. HOW MANY WEEKS’ NOTICE DOES YOUR COMPANY PROVIDE TO EMPLOYEES’? CHOOSE ONE OPTION.
2 WEEKS OR LESS
3–4 WEEKS
5–6 WEEKS
7 OR MORE WEEKS
YES, FOR ALL OR THE MAJORITY OF EMPLOYEES
YES, ON A CASE-BY-CASE BASIS
NO
ACCORDING TO STATUTORY REQUIREMENTS
ABOVE STATUTORY REQUIREMENTS
YES, EMPLOYEES MAY CHOOSE SALARY IN LIEU OF THE NOTICE PERIOD
YES, EMPLOYEES MAY BE FORCED TO RECEIVE SALARY IN LIEU OF THE NOTICE PERIOD (E.G., GARDEN LEAVE)
NO
IS YOUR COMPANY’S NOTICE PERIOD PROVIDED ACCORDING TO STATUTORY REQUIREMENTS OR ABOVE STATUTORY REQUIREMENTS? CHOOSE ONE OPTION.
10.
DOES YOUR COMPANY PROVIDE SALARY IN LIEU OF THE NOTICE PERIOD? CHOOSE ONE OPTION.
11.
ARE EMPLOYEES PERMITTED TO USE REMAINING ANNUAL LEAVE (E.G., PERSONAL DAYS, VACATION DAYS, ETC.) DURING THE NOTICE PERIOD? CHOOSE ONE OPTION.
12.
SEVERANCE PAYMENTS
INDUSTRY SCORECARD
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 8
ACCRUED SICK LEAVE
PRO-RATED BENEFITS COMMISSIONS
NONE OF THE ABOVE
PRO-RATED SHORT-TERM INCENTIVE
ACCRUED ANNUAL LEAVE
PRO-RATED CAR ALLOWANCE (IF APPLICABLE)
WHICH OF THE FOLLOWING ARE INCLUDED IN THE FINAL SEVERANCE PAYMENT? CHOOSE ALL OPTIONS THAT APPLY.
13.
PAYMENT FORMULA
INDUSTRY SCORECARD
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 9
NO MINIMUM 1 WEEK
A MINIMUM 1 WEEKS’ PAY
A MINIMUM 2 WEEKS’ PAY
A MINIMUM 3 WEEKS’ PAY
A MINIMUM 4 WEEKS’ PAY
A MINIMUM 5 WEEKS’ PAY
A MINIMUM 6 WEEKS’ PAY
2 WEEKS
3 WEEKS
4 WEEKS
5 WEEKS
6 OR MORE WEEKS
HOW MANY WEEKS OF PAY IS PROVIDED PER YEAR OF SERVICE? CHOOSE ONE OPTION.
15.WHAT IS THE MINIMUM SEVERANCE PAYMENT PROVIDED TO AN EMPLOYEE CHOOSE ONE OPTION.
14.
INDUSTRY SCORECARD
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© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ 10
MY TOTAL POINTSCongratulations! You’ve finished the quiz. Now it’s time to review your score. The points awarded to your company for each of the questions on the previous pages are summarized below. Compare your company score to the score of each global industry, and consider how your results might stack up against competitors. Your results may show that it’s time to re-evaluate your severance pay policy in order to make them more competitive, or they may indicate that your severance pay program is a potential strength in your benefits package, one that should be promoted during recruitment activities. In addition to your own industry, be sure to cross-check your scores against those from which you may recruit, as top talent may be comparing your own offerings against those offered by their current employer.
SEVERANCE PAY POLICY NOTICE PERIOD SEVERANCE PAYMENTS PAYMENT FORMULA TOTAL SCORE
MY POINTS
MAXIMUM POINTS 26 22 6 22 76
Purchase the complete report to compare your company score to the score of each global industry and consider how your results might stack up against competitors. In addition to your own industry, be sure to cross-check your scores against industries from which you may recruit; top talent may be comparing your own offerings against those offered by their current employer.
© 2018 MERCER LLC. SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ
Mercer Select IntelligenceSM is a global membership platform, offering HR and business professionals digital and in-person access to cutting-edge research, analysis, productivity tools, best practices, on-demand expertise, and peer networks. When it’s time to shape policy and make critical people-strategy decisions, Mercer Select Intelligence will keep you ahead of the curve with actionable insights into the latest HR news and key issues, including legislative and regulatory initiatives, local and global economic indicators, and emerging trends. As your trusted resource in a rapidly changing business environment, the Mercer Select Intelligence membership will continually evolve to deliver the human capital insights that you need to succeed. Visit select.mercer.com to learn more.
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12© 2018 MERCER LLC.
ABOUT MERCER At Mercer, we make a difference in the lives of more than 110 million people every day by advancing their health, wealth, and careers. We’re in the business of creating more secure and rewarding futures for our clients and their employees — whether we’re designing affordable health plans, assuring income for retirement, or aligning workers with workforce needs. Using analysis and insights as catalysts for change, we anticipate and understand the individual impact of business decisions, now and in the future. We see people’s current and future needs through a lens of innovation, and our holistic view, specialized expertise, and deep analytical rigor underpin each and every idea and solution we offer. For more than 70 years, we’ve turned our insights into actions, enabling people around the globe to live, work, and retire well. At Mercer, we say we Make Tomorrow, Today.
Mercer LLC and its separately incorporated operating entities around the world are part of Marsh & McLennan Companies, a publicly held company (ticker symbol: MMC) listed on the New York, Chicago, and London stock exchanges.
SEVERANCE PAY POLICIES INDUSTRY SCORECARD QUIZ
Copyright 2018 Mercer LLC. All rights reserved.
For further information, please contact your local Mercer office or visit our website at www.imercer.com
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