John, a Marketing Director, has relocated to Italy. Maria reports to him.
John and Maria have been working for a year, but they don’t agree on how to do several marketing projects.
Maria has been working for 11 years, always with good reviews, was promoted twice, and makes $160,000 per year.
John fires Maria, unaware that in Italy severance must be paid, by law.
Deloitte calculates her severance cost to be $520,000.
In the US, there is no legal requirement to pay severance.
Should we pay severance in the US?
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Should we pay severance in the US?
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Yes, for 2 reasons
– from companies side, severance could help lower the risk of any legal issues that could come across after a termination.
– On a more personal pov, considering that labor laws are not the best in the US, severance seems the humanitarian thing to do to compensate on the lack of benefits, it gives employees more reasons too to join a company.
I believe we should pay severance in the US because it would give workers some “cushion” while they find a job they enjoy. I’m a big believer that if you work at a place you like, and/or enjoy your job you will perform better than working at a place you don’t like – this benefits companies because it means they are hiring productive workers.
I’m also bias because I have received severance package twice from the same company. The first time was because the company itself was closing for renovation and all employees were laid-off. The second time was due to COVID and the company having to reduce headcount to survive the pandemic. Both times the severance package was paid out based on the number of years you had been at the company.
Wouldn’t you say also, that you are much more positive about both companies because they did that? You are likely to tell others and that would help the brand.
Absolutely! I love the brand and what they do to help employees. They have actually won multiple awards, several times in multiple countries such as “Great place to work” and “GPTW & Fortune #1 Best Place to Work for Women in the U.S.” 🙂
I think we should pay severance in the US, even though the law doesn’t dictate a need for severance pay. This is good for companies and for the employees. For companies, paying severance is a way to protect themselves from potential litigation and maintain their reputation. A negative review may affect the business and future recruitment efforts. Job seekers may don’t want to apply for a job at the company after learning about bad reviews of firings or layoffs at that company. Or, consumers may stop consuming a brand after hearing about the poor treatment of a company’s employees. Therefore, it is crucial for the company to handle any employee’s exit properly.
From an ethical standpoint, absolutely. There need to be country-wide labor protection laws that protect employees dedicating their time to a company. Without severance ensured, companies can make quick decisions that impact the lives of employees without any regard for their wellbeing or livelihood.
I advocate that U.S. companies should pay severance to the employees. Because this would also be considered into consideration when someone intends to apply for the job in a company. Without severance means that people will have less economic guarantee when they want to leave the company, and that may decrease people’s overall willing to join the company.
I believe severance should be paid in the US as it provides financial stability while looking for another job
I think the company needs to pay for it.
First of all, it will better guarantee the rights and interests of workers. Avoiding managers who fire employees for personal reasons. Second, this expense shows the company’s social responsibility, which is conducive to employees’ better intention to the company, so as to better serve the company.
I would argue that severance pay should not be required by law from policy perspective.
We should juxtapose statutory severance pay from different countries and see what role statutory severance pay play between companies and their employees.
In countries like the United States, many corporations have labor unions where employees have the right to negotiate with large corporations. In addition to that, U.S. legal system ensures the agreement between companies and employees is well enforced.
However, many Asian countries do not have labor unions and a regulated social securities system, so making severance pay required by law is one of the ways to balance the power between the company and employees.
In other words, Statutory severance pay is designed to maintain balance rights between the company and employees. In the U.S., well enforcement of an agreement between corporations and employees is well served for balanced rights. If the U.S. government makes severance pay required by law, it would hurt discretionary power for companies to operate the free-market economy at its optimal level.
Ye,
Very interesting and inspiring perspectives! You literally brought up something that I wouldn’t take into consideration. I agree with you on the balance rights between the company and employees in the U.S. and the fact that if severance pay is required by law then it would bring the downside to the market in general.
I believe that severance should be paid in the US. Employees need financial support when seeking another job. It should be considered as a part of employee wellbeing.
Yes, I totally agree that all US companies should pay severance. The employees who are going to be fired will face financial difficulties, lost income resources, mental depression, and wasted of time of getting used to the corporation cultures. It is not responsible for a company to let the workers who had contributed to the business face all the undesired situations. However, if severance will be included in a law, I think it need to be more specific about the requirements of giving the severance. For example, define a negative unemployment situation which will force the company to pay for severances.
I think the US must definitely pay severance when it is due. The employees that are not given a notice period must be given a severance since being laid off is unplanned which could cause an employee financial hardship. Additionally, not paying severance time and again could give the company a bad reputation thereby making future employees hesitant to join the company due to uncertainty of the future.
I think yes and no depending on each individual case’s severity and reasons for termination. If the termination resulted from poor working relationship, then it can be considered as wrongful termination and the employee deserve severance payment. However, if the reason stems from poor performance, companies should not be obligated to pay. So, the US law should carefully specified on which grounds should severance be paid.
In my perspective, as a business man, we should not pay the severance in us. the reason is that paying severance means increasing the cost for a corporate. every corporate has their right to dismiss a employee or not. once a corporate makes a decision, I believe that when a company makes a decision, it must be a comprehensive decision rather than a random decision.
yes.
1. paying severance raise the cost of depart employees, will reduce turnover, keep things steadily.
2. Guarantee employees’ right and bulid up reputation for company.
Actually it depends. If the dismission is required by the employee, and there is no mistake in the company, we shouldn’t pay the severance, as there is no legal requirement to pay severance. For instance, the employee find a job in other company where salaries are higher.
While if it’s our company who wants to fire the employee–even though it’s because the employee’s bad working ability, we are supposed to pay severance out of humanism, what’s more importantly for a better corporate image which can create value for our brand. If we’re considered as company with ethic and social responsibility, consumers and clients would be more loyal and be more willing to buy our products. And there would be more competent people willing to join us due to our good stuff walfare.
Severance payments should be made to employees who are laid off due to economic downturn or company financial problems. This behavior is building the company’s reputation and would be reasonable for both fired employees and current employees, it also contributes to the overall economic development as the severance will ease the economic hardship of fired employees and offer them a buffer period before they can find other ways or a new job to sustain living.
I think the company should give severance pay. Severance pays to a large extent protects the interests of employees in the event that they suffer injustice. Severance pays can also provide temporary security for an employee’s life after be laying off. For example, when an employee is abruptly fired without his or her knowledge, his or her living expenses and other expenses can cause big problems for him or her. Because he is now in a state of no income. However, if the company is able to offer severance, the burden on the employee may not be as great. He can spend this money on his life until he finds his next job.
I believe that it’s important for companies in the US to pay severance to employees who are getting fired, especially if they were noticed about the decision in a very short period. For the company, it builds a good reputation for the company, it calms employees for not suing the company, or saying bad comments/words to others about the company. For the employee, it’s human for them to have some kind of money to stabilize their life and sustain their families while searching for other job, but also it’s reward for their loyalty to the company.
Yes, mostly because cutting off someone from their livelihood and financial stability without any support is cruel. Providing financial help to an ex-employee is the least they can do when dismissing them from a position. Additionally, if you want to create a good culture within your company employees need to feel that you got their back and appreciate them. Even after you part ways. If other employees see that their friend or peer is discarded unceremoniously it could breed unproductive work and even produce other quitting out of under appreciation. Essentially, it is the compassionate and respectful thing to do considering the employee and the company’s wellbeing.