What Is A Fair Severance Policy?

Sooner or later each of us will be faced with negotiating for severance.  It is a sad fact of life in business today.

Over the years, I have met employees from many different companies who have been downsized or otherwise terminated.  I have met employees who have left almost every advertising agency.  I have also met terminated employees from many, many different companies.  There is a huge difference between the way ad agencies end an employee’s term and the way most corporations do the same thing.

The difference between the two is that ad agencies are, for the most part pretty stingy.  Companies generally have decent severance packages which include, among other things, out placement services. Rarely do I hear from people from companies who say that their packages were not fair.  But people from ad agencies say just the opposite because ad agencies offer almost nothing.  If one is lucky enough to have a termination clause in their original letter of agreement/offer letter, severance may be better than normal “policy”.

Severance is not just salary and vacation. It also includes healthcare, outplacement, use of office and other elements, but to keep this post simple, I am only going to deal with salary issues.

Many agencies have a policy which calls for a week’s severance for every year of employment. These policies date back to decades ago when the economy and the business was different.  Once upon a time, the rule of thumb was that it used to be it would take one month to find a job for each $10,000 in salary.  In those days, that was probably a fair formula.  Today, given the high unemployment rate in the country, 7.6%, and given that it is probably higher in advertising, the rule of thumb is that it takes two or three months to find a job for each $10,000 in salary.

Somehow I think it is wrong for a person who has been employed by the same company for many years to simply be cast aside with a week a year.  That means that if you are somewhere for most of your career, say twenty years, you would get about five month’s severance.  Now I fully understand a week a year for the first couple of years, but someone who gives their all for a long period of time should not be cast aside with meager severance.  The problem is that the holding company agencies are so overly governed by rules that it is very difficult to get around them, although I have heard that it can be done, but not without hassle.

Every case is different and should not be governed by mere “policy.”  Following is a good example.

I recently met an account person who was sixteen years at one of the big agencies.  They transferred him around the country to various offices to handle troubled accounts.  They finally put him in an office that they knew was in big trouble; they transferred the account he had been running into that office to help stabilize it.  It was too little, too late for the office.  Since each office governs itself, once he was turned over to that office, he was in their jurisdiction.  The office was losing business and ultimately decided that his big salary was too much for them to bear, despite running a successful and profitable account.  Since the account was under contract, they figured they could safely replace him with a less expensive person.  He was downsized only a few months after he arrived at the office.  The headquarters office knew nothing about it, but even worse, would and could do nothing for him and allowed his severance to stand at one week a year.  They did not even want to pay his relocation back to New York.  I told him to get a lawyer.

Sticking to the corporate policy may be okay in many cases, but not all.  It certainly wasn’t in the above cited instance.  Someone beyond HR who actually knows the individual should be in charge of evaluating circumstances with the ability to make adjustments.  The answer that. “If we do it for one, we have to do it for all” is just wrong and unfair.

While the need for governing policy makes sense, there has to be common sense applied to those policies.  Suppose the person was in the job for forty years, an entire career.  Would it be fair to terminate him or her with less than a year’s payment after a whole life of employment?  Or how about the person who is recruited and chased by a company and hired away from a good and secure job and then six months later, because of account losses is terminated for financial reasons.  I have seen last in first out situations where the person is given only their accrued vacation time, patted on the head and said goodbye to.  I knew one person who started at the old Lintas two days after they lost Burger King on one of their package goods accounts.  He was terminated on day three of his employment with no apology and no severance despite taking him out of a perfectly good job.

The point is that every circumstance is different.  Every employee has a different story.  Each has to be looked at.  The rule of thumb should be fairness and not corporate convenience.  I know it is far more work, but we are dealing with human lives and careers so that an extra effort is called for.

The best severance is the one you negotiate before accepting an offer..