How to Establish a Severance Plan

No business owner or manager wants to think about letting employees go. Unfortunately, it is a part of doing business that your organization should be prepared for. Help your business prepare for the unexpected by setting up a severance plan with the tips below from Prescott HR. 

What is a severance package?

A severance plan includes a set lump sum payment that a terminated employee receives when they are let go from a company through no fault of their own. You may have seen this in the news recently as tech companies like Meta and Twitter laid off large numbers of their staff. Companies typically have to lay off employees for reasons like economic hardship or when they downsize. It’s important to note that severance packages are not required by law. However, establishing a severance package is a gesture of goodwill as an employer that you want to take care of your staff in the event that unforeseen layoffs or downsizing. 

 

What’s included in a severance package?

Your organization’s severance package can include a variety of different benefits. It should be designed to help carry a terminated employee through several months of unemployment while they search for a new job. Here are some considerations to include in your organization’s severance package: 

  • A lump sum of money, usually based on the salary and number of years the employee has worked at the company 
  • A continuation of insurance benefits, including health, vision, dental, or life insurance
  • A lump sum payout of any unused sick days or paid-time-off days
  • Stock options, if your organization has them
  • Assistance with finding a new position for the terminated team member

 

Document your organization’s severance package

When you’re ready to form a severance package for your organization, it’s essential to put the plan in writing to keep your team on the same page. A severance package should be a legal document that clearly states the terms of the agreement the organization is taking with any future terminated employees. Discuss your options for drawing up this legal agreement with a lawyer or your organization’s legal team. The purpose of creating a legal document for your organization’s severance package is to prevent a terminated employee from filing a future lawsuit. This agreement should include why the employee was terminated, the conditions the terminated employee must meet to receive the severance package, and the right of the organization to end or change the severance package. You can even include a non-disclosure agreement that the terminated employee must sign to receive the severance package. 

 

Work with Prescott HR

Does your organization need help with establishing a severance package? We are here to help! Prescott HR offers a wide range of services that can help your organization evaluate your current policies and incorporate new ones, as needed. Our unintimated HR practices allow us to be focused and effective, providing your business with precisely what you need. Give us a call today at 443-351-8818 or contact us online.

Read More
  • Kimberly Prescott
  • Blog
  • November 7, 2022

How to Handle Employee Terminations

Letting go of an employee is one of the most difficult parts of an organization’s human resources team. It’s a sensitive event that can go awry when not handled in the proper way. If you have an upcoming termination to deal with, read through these helpful tips from Prescott HR before approaching your employee. 

 

Come Prepared

One of the worst ways to handle a termination is to come unprepared to your meeting. Before you even set a time to sit down with your employee, you and your executive team should gather documentation for why you are letting your employee go. Sit down with the employee’s personnel file and compile a list of reasons for the termination. You want to make sure that you are thinking through the termination in an unbiased way to avoid employment discrimination in your decision-making process. That’s where having documentation to back up your decision can help.

 

Don’t Catch Them Off Guard

In a sensitive situation like a termination, you want to show respect for your employee by not catching them off guard. Before you let an employee go, there should be procedures in place to warn the employee of potential termination. Make sure that your team has tried to effectively communicate any issues to the employee before termination in order to give them a chance to correct their output. If the employee continues to underperform after several warning meetings, then they should not be surprised or caught off guard during their termination meeting.

 

Be Direct

If preventative measures have unfortunately not worked with an employee, then it’s time to let them go for the good of your organization. In these circumstances, you have to be clear, concise, and direct. There should be no room for drama or lingering questions. When you sit your employee down, give them a brief and direct communication that they are being let go and the decision is final.

Always Be Empathetic

Keep in mind that termination is a very difficult topic and the employee you are letting go is a human being. Always practice empathy and respect, even in the event of a difficult termination. How you handle a termination will also reflect on your other team members’ willingness to stay on board at your organization. If not handled properly, this can put a sour taste in the mouths of other team members. 

 

Don’t Skip Offboarding

Even in heightened emotional states, it’s important to not skip out on offboarding practices. After you make the announcement that you are letting an employee go, be sure to collect all necessary company property and remove employee access to company assets. 

 

Work with Prescott HR

Does your organization need help to handle a team member’s termination? We are here to help! Prescott HR offers a wide range of services that can help your organization evaluate your team’s current skills, plus offer ways to improve. Our stringent HR practices allow us to be focused and effective, providing your business with precisely what you need. Give us a call today at 443-351-8818 or contact us online.

Read More