Editor’s note: This is part one in a two-part series highlighting key findings from Randstad RiseSmart’s ‘2021 Guide to Severance & Workforce Transition.’ Stay tuned for part two of the series and download the comprehensive report here.
Human resources leaders invest a significant amount of time and resources into supporting the best employee experience possible. A recent study from Forrester found that the number of HR decision makers who say employee experience is the most important aspect of their HR strategy has nearly tripled over the last two years. Additionally, 78% of HR managers believe employee experience will become one of the most crucial factors impacting their ability to deliver on key business objectives.
An employee-first approach includes helping individuals expand their experiences and skills so that they can not only grow in their own careers but also support the organization as business needs shift. Given this mindset, the last thing any organization wants to do is let go of its valued team members.
Unfortunately, separation is a reality in business – whether due to employee performance, a merger or acquisition, changing business needs or other factors. It’s never a pleasant experience for anyone involved and how organizations approach separation can have a significant impact on their ability to retain and attract talent.
To learn more about severance trends and the current state of practice, we surveyed almost 2,000 HR leaders from eight countries and a wide range of industries. The biennial ‘Guide to Severance & Workforce Transition,’ considered a benchmark report by HR professionals, provides a global snapshot of the shifting trends and attitudes toward severance, separation, outplacement, retention and redeployment – and the impact on employer brand.
Among a variety of findings, a common trend throughout the survey showed that organizations are prioritizing an employee-first experience – including for their departing employees. This trend was evident based on organizations expanding severance plans, adding outplacement benefits and partnering with external outplacement firms to offer employees impacted by workforce restructuring the best exit experience possible. We’ll dive into these findings in more detail below.
employers expand severance to improve employee experience and attract talent
In the past two years, organizations have expanded severance plans to cover more employees – 64% of respondents offer severance to all employees, compared to only 44% in 2019. In additions, those in administrative and clerical positions are more likely to receive severance (42%) than previously. The service time required for eligibility has also shortened as evidenced by a 13% drop in the number of companies requiring at least five years of service time, from 38% to 25% and the increase in the percentage of employees eligible for severance with less than a year of service (10% in 2021 versus 3% in 2019). What’s more, nine percent of companies do not require a minimum service time. Fifty-three percent of organizations require between one and five years of service for eligibility.
The survey also found that more than a quarter (27%) of respondents have updated their severance policies in the past two years. Mid-size companies (250-5,000 employees) cited the most changes, while the smallest and largest organizations were most likely to continue with their existing severance policies.
Among organizations that made changes to their severance benefits, coverage in seven out of 10 categories – including education, financial planning and outplacement, among others – either remained at the same level or expanded. The top reasons for expanding severance plans and coverage, according to survey respondents, are to improve the employee experience and compete for talent.
In the past two years, benefits such as education and retraining and financial planning became more popular. This finding is encouraging, as it shows that organizations understand the importance of investing in their employees even as they leave the organization. Offering employees resources to support their financial security and providing them with tools to develop skills they can take to new opportunities will help employees land back on their feet and remain relevant in today’s ever-evolving job market, which will also have a positive impact on an organization’s employer brand and corporate reputation.
Looking ahead, when asked whether they plan to make changes to their severance plans in the next 12 months, 26% of organizations say ‘yes.’ Among the benefits slated for change are health benefits continuance, eligibility and retirement benefits.
more organizations are embracing outplacement benefits
In addition to expanding severance benefits, the number of organizations offering outplacement to impacted employees has dramatically increased. According to the survey, 63% of organizations began offering outplacement in the past two years. The top reasons organizations offer outplacement benefits all tie back to prioritizing the employee experience, including:
- maintain morale and productivity among remaining employees (77%)
- value employee contributions and an employee-first culture (72%)
- maintain positive employer brand (69%)
Regarding which employees receive outplacement benefits, 55% of survey respondents say they offer outplacement services for separated employees, and of that, 57% offer it to nonexempt employees. The rate at which companies offer outplacement to impacted employees has risen five percent since 2019 – but it’s fallen six percent for nonexempt employees, meaning more full-time employees receive outplacement today, but the opposite is true for hourly workers.
While outplacement can include a wide range of support, the top outplacement services organizations offer impacted employees, according to the survey, include:
- resume writing (54%)
- relevant job leads (52%)
- resume critique (43%)
- digital profile support (40%)
- individual career coaching sessions (40%)
In a highly competitive and evolving hiring market, job seekers need to understand the latest job search techniques and how to best highlight their skills and expertise. Offering outplacement to departing employees can help them land their next role sooner, which will in turn have a positive impact on an organization’s alumni relationships and employer brand, while reducing costs such as those associated with severance and unemployment taxes.
the pandemic's impact on severance and outplacement
As organizations across industries faced massive disruptions due to the COVID-19 pandemic, our global survey shows that severance and outplacement were also impacted. Among respondents who began offering outplacement in the past two years, 60% indicated that COVID-19 affected their decision to do so, which shows a high degree of corporate responsibility and empathy.
When employers do right by their employees, especially during challenging times such as the pandemic, this helps impacted individuals remain employable and has a long-lasting, positive effect on an organization’s brand.
Airbnb is one of the many organizations that made the difficult decision to restructure its workforce during the pandemic. In an open letter to employees released in May 2020, Airbnb Co-Founder and CEO Brian Chesky announced that the company was reducing its workforce by 25%. His letter is a strong example of transparency and compassion that reflects brand values. In addition to severance and healthcare benefits, the letter shared several ways that Airbnb offered impacted employees job support, including four months of outplacement services. Other organizations, such as Intuit and Mozilla, took a similar approach.
While many organizations expanded their outplacement benefits given the pandemic’s impact, more than a quarter (28%) of respondents made changes to their severance policies to cut costs in the wake of the pandemic. This is an unfortunate consequence of COVID-19’s sweeping impact on the global economy and indicates that severance remains a luxury for many organizations. However, severance offers organizations a multitude of benefits related to talent attraction, retention and employer branding and we are hopeful that as the economy recovers, many companies will bring back severance benefits they might have decreased during the pandemic.
HR leaders recognize the value of partnership
Given the rapidly changing world of work, HR teams are often asked to do more with less and find themselves juggling countless responsibilities. Between this and the increased focus on caring for employees at every stage of their employment journey, more HR leaders are seeing the value in relying on outside experts to manage certain responsibilities that aren’t part of day-to-day business operations, such as outplacement.
According to our global survey, only 38% of respondents said outplacement was managed exclusively by internal teams. The majority (59%) said outplacement was managed by external partners or a hybrid of both service providers and internal stakeholders. This represents a nearly twofold increase compared to our last survey in 2019, when just 34% leveraged outside partners.
In addition to the need to focus on an ever-increasing list of tasks and responsibilities, very few HR teams have outplacement experts on board, so leveraging the knowledge and best practices of external partners just makes business sense. While some businesses might have faced workforce reductions because of a merger, acquisition or cash flow challenges, many HR practitioners likely have not had prior experience with sudden workforce reductions, given that the last significant economic downturn, prior to the pandemic, occurred over a decade ago during the Great Recession.
By relying on an expert outplacement and career transition partner, companies can manage workforce transitions more smoothly, protecting impacted employees and employer brand, while giving HR teams more time to continue juggling other pressing priorities. Workforce restructuring, both large and small, is a natural part of the business cycle, so it is not a matter of ‘if,’ but rather, ‘when.’ The best time to establish a partnership with an outplacement provider is before you need one. This will enable you to thoroughly investigate the services and track record of providers, as well as their cultural fit with your organization.
Findings related to expanded severance and outplacement benefits, as well as the value of partnership are just a few of the many insights unveiled in the ‘2021 Guide to Severance & Workforce Transition.’ In the second part of this blog series, we’ll cover how organizations are approaching employee engagement and retention following a restructure.
Download the comprehensive report or to learn more about the findings highlighted here, as well as:
- benefits of implementing a comprehensive redeployment strategy
- how HR leaders approach employee retention
- steps organizations can take to build a positive employer brand
- key nuances in how different countries approach severance and career transition
- industry spotlights covering high-level severance and separation difference across industries