What is one best practice when creating a severance policy?

To help you create the best severance policy for your workforce, we asked CEOs and business leaders this question for their best insights. From being consistent to compensating for unused vacation days, there are several tips that you may adopt as best practices to help you develop the right severance policy for your workforce.

Here are six severance policy best practices:

  • Be Consistent
  • Understand Your Company’s Culture
  • Make The Policy Clear To Employees From Day 1
  • Offer Severance Pay for Each Year Worked
  • Be Fair To All Parties Involved
  • Compensate for Unused Vacation Days


Be Consistent

When creating a severance policy, practice consistency and don’t give in to negotiations. Be transparent and make sure that the severance package you offer remains unchanged and is unnegotiable. You want to come off as a fair boss, which means no matter how much you appreciate the leaving employee, you must stay true to the policy and don’t give any bonuses based on your personal bias.

Natalia Brzezinska, PhotoAiD


Understand Your Company’s Culture 

The first step toward creating a comprehensive severance policy is understanding your company’s culture. In addition to understanding the legal requirements of a severance policy, it’s also important to understand what employees value most in their work experience. For example, it might be more important for an employee to receive a certain level of pay or benefits than it is for another employee to have the opportunity to learn new skills or take on new responsibilities. Once you’ve identified what employees value most, you can tailor your severance policy accordingly.

You should also consider the pros and cons when drafting your severance policy. While a severance package may seem like a great idea when you’re looking for ways to save money, it could end up costing you more money in the long run. For example, you might lose out on valuable employees who would have stayed with your company if they were offered the same severance package as those who were fired.

Peter Bryla, ResumeLab


Make The Policy Clear To Employees From Day 1

Companies should always be transparent about severance policies. This will help them to prevent any appearance of discrimination. Disgruntled employees cannot make a claim if information on severance policies was made readily available to every individual in the organization. Being transparent about severance policies also allows employees to plan better for a transition to the next phase of their professional life. Employees who are aware of the severance policy can conceptualize how much runway they have when they consider providing for their family or paying for living expenses. Companies should be transparent about their severance policies for the wellbeing of their employees.

Sean Doherty, Box Genie


Offer Severance Pay for Each Year Worked

Severance pay usually helps you as a business leader to build a positive working culture and reputation for other employees. Mostly, it is important that you give at least two weeks’ pay of severance for every year that an employee has worked with you. You can even give more weeks if the company is doing well. This will not hurt you but rather will build a good reputation and keep your employees motivated. You might even have high employee retention and less employee turnover when they see the benefits they are going to get.

Gisera Mantada, WeLoans


Be Fair To All Parties Involved

Always ensure that you have the right intentions when creating a severance policy. Your employees should not feel like your intention is to get rid of people at the organization. Therefore, ensure that the policies are fair and clear. The policy should be easily understandable by employees. It will help employees know what they are entitled to. Managers will also understand how to apply it consistently.

Ivy Bosibori, USBadCreditLoans


Compensate for Unused Vacation Days

One best practice for a severance policy is to compensate for any unused vacation time. For example, if an employee has three unused vacation days, one should consider including the cash equivalent for those days in their severance lump sum. This can also work for personal and sick days too. Employees would much rather have a small sum of extra cash than be forced to take those last days off in the little time they have left with the company.

Sheila Busheri, Universal Diagnostic Laboratories



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