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Severance Payments To Laid Off Workers Are Disappearing

The Wall Street Journal points out that fewer companies are paying severance to laid off employees.

As the recession persists, companies are cutting costs not only by letting workers go, but also through reducing the benefits provided to departing employees.  There are three key areas where employers are cutting back:

  • Severance Payments – Often, companies will provide serverance compensation that is based on how long you have been with the organization.  While the standard “two weeks of salary for every year worked” is a metric that many are familiar with, some companies are reducing this to one week per year of experience, or none at all.  Unless it is stated in an employment contract, employers are not obligated to make severance payments.

  • Health Benefits – In addition to severance payments, many large companies will extend your health insurance beyond your final date of employment.  Once this extension runs out, you would be eligible to continue the health coverage under COBRA, but without your employer footing the bill.  With the federal government’s COBRA subsidy in place, many employers have reduced or eliminated their continuation of medical insurance.  (To learn more, see Smart Unemployment’s COBRA overview.)
  • Outplacement Services – In the case of mass layoffs, companies will often provide their former employees help in finding a new job.  This can range from computer access, office space, or access to recruiters.  As you would expect, these services cost companies money, and are also being reduced for cost saving purposes.