Study: Manufacturing Sector Pays Out Less Severance

Research on severance practices has found that all levels of employees laid off from the manufacturing sector receive less severance pay than those employed by other industries.

PHILADELPHIA, Pa. -- Right Management, a division of Manpower, has conducted industry-specific research on severance practices and found that all levels of employees laid off from the manufacturing sector receive less severance pay than those employed by other industries.

The research provides benchmarking data for managers responsible for separating employees from the manufacturing sector and also aids those laid off to understand what they can expect from a typical severance package in their industry. 

The global study across 28 countries draws from more than 1,500 responses, including 356 from the manufacturing sector.

The fast-changing and demanding global market is placing increased pressure on companies in the manufacturing sector to compete more effectively, observed George Herrmann, Executive Vice President of The Americas at Right Management. “The result has been restructuring, downsizing and cutbacks. And when those initiatives are implemented, departing employees need to be supported with severance practices that are aligned with industry norms and the company’s sense of corporate responsibility and values.”

Among the study’s key findings:

Severance Policy

  • Severance and termination policies are primarily governed by a combination of company policy and local/national law.
  • In the event of employee termination, most companies are required by law to give a certain amount of advance notification to the employee.
  • Just over half of those surveyed said their company had a formal, written severance policy.
  • Eligibility for severance differs by industry, with just under half of companies in the manufacturing sector having no minimum requirement.

Severance Calculation

  • Top executives earn the most severance per year of service, whether they are voluntarily separated (3.22 weeks per year) or involuntarily separated (3.28 weeks per year).
  • Regardless of position or type of separation, severance is most frequently offered as a lump sum payment.
  • Sixty percent of the companies surveyed put a cap on severance payouts.

Benefits

  • Regardless of employee level, the most common benefits included in a severance package are assistance programs (like outplacement and financial planning), continued benefits (such as healthcare and financial compensation), and to a lesser extent, company resources such as an office or car.
  • Eighty-two percent of terminated employees are required to sign a waiver or release before they can access severance benefits.
  • Although not legally required, 80 percent of the companies surveyed provide outplacement services.

“Understanding how severance practices vary by industry and country is a critical component of an effective global workforce strategy,” advised Herrmann. “Whether responsible for managing a workforce in one country or many, managers in the manufacturing sector can use this data to compare their own practices with broad-based norms to ensure they are providing fair and equitable severance packages.”

The full report can be downloaded at www.right.com/globalseverance. The report includes differences by region, industry, market maturity and level of employee.

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