The ground employees land on after being shoved out the door in a downsizing differs remarkably in cushioning. Greater than the difference between Astroturf and grass, it is more like the spread between ripped-up asphalt and clover — nice, thick clover.
At the gritty, nothing-but-pain end of the scale are state workers, hundreds of whom have gotten their walking papers during the past few weeks. "Severance is a business concept," a state worker, who shall remain anonymous, wrote in an E-mail. "State workers get nothing." Could that be true?
A call to Bill O’Brien, spokesman for the New Jersey Department of Personnel, confirmed that, indeed, the amount of severance state workers get is exactly zero. Those who are employed under civil service rules, however, do get 45 days notice. The anonymous E-mailer, who has been working for the state for more than 10 years and who still has her job, says non-civil service workers in her department are being given only two weeks notice, but are being told to leave immediately. So, in effect, they are getting a little severance pay. O’Brien could not confirm that this is happening.
State workers are paid accrued vacation time when they are let go, but lose accrued sick time, which can be a big deal in state jobs. O’Brien says retiring workers can collect cash in lieu of up to six months worth of sick days or $15,000, whichever amount is lower. While laid-off workers can not cash in unused sick days, they can reclaim them if they are rehired.
The anonymous E-mail provided an example of life at the other end of the severance scale. "My sister managed to get canned from two jobs in two years, and got six months salary each time," she reports. Her sister is not only a private sector employee, but also an executive. Both very good things to be at lay-off time.
Lee Hecht Harrison, an international outplacement firm with an office at 999 Lenox Drive, has just published a fascinatingly detailed study showing what employees typically receive in severance and other lay-off related compensation. The study breaks the data down by industry and by job classification. The differences are wide enough that job seekers might want to take note.
Barbara Barra, one of the firm’s regional vice presidents, speaks on "Severance & Separation Benefits: Bridges for Employees in Transition" at a free meeting for human resource professionals on Thursday, February 28, at 8 a.m. at the Marriott. Call 609-896-3867. Here are some of the hard realities concerning soft landings:
Executives at the biggest companies do the best. Across the board, executives do better — far better — than the rank and file. And the higher the executive has risen, the more generous the sum he will be given to break his fall. The average maximum range for senior executives is 32 to 53 weeks of severance. Exempt employees — managers, scientists, and the like — fall at about 10 weeks below senior executives. At the bottom of the pile are non-exempt employees, a group that includes secretaries, janitors, and newspaper reporters. The non-exempts receive about 15 weeks less than their top bosses. These numbers are based on formulas that generally award severance based upon salary multiplied by length of time on the job.
While the masters of the universe receive more severance than underlings in their company, there are huge differences between what senior executives — and every other class of employees, too — get at companies of different sizes.
At lay-off time, being with a giant corporation is a good thing. Lee Hecht Harrison’s study shows that companies with more than 25,000 employees pay, on average, more than twice the amount of severance than do companies with fewer than 101 employees. An exempt employee at one of the largest companies receives up to 44 weeks severance, compared with the 21 weeks paid to his counterpart at one of the smallest companies.
Employees at the next largest group of companies — 10,001 to 25,000 employees — do nearly as well, and in some job classes, even fare a little better. In general, the payments decrease as employee rolls shrink below the 10,000-employee point.
Banking and pharmaceutical are among the most generous. Size isn’t the only thing that matters, though. Some industries are far more generous with severance and related benefits than are others. Banking and financial services lead the pack, providing even non-exempt employees up to 39 weeks of severance on average. The professional business services sector draws up the rear, falling below even the non-profit industry. Non-exempts working for a company in this industry get a maximum of 17 weeks on average.
Medical products and pharmaceuticals, an industry that is a mainstay of central New Jersey’s economic life, comes in second for generosity to dismissed workers. Insurance, another big central New Jersey employer, is in third place. Telecommunications stands at 11, retail at 15, and the non-profit sector is in 15th place.
Companies differ by size and by industry not only in the amount of severance they pay, but to whom they pay it. The largest companies extend the money to part-time employees as well as to full-time employees. The smallest companies include part-time employees in severance programs just 37 percent of the time. Hospitals give severance to part timers 64 percent of the time, while companies in the hospitality industry do so only 22 percent of the time.
Outplacement often accompanies severance. Another cushion companies provide when they show employees to the door is outplacement service. Lee Hecht Harrison’s survey shows substantial differences in outplacement policies, but a constant is that, once again, top executives come out on top. Half to three-quarters of all companies, except the very smallest, provide outplacement to all officers, senior executives, and executives. For non-exempt employees, the averages drop down to 27 to 47 percent.
The type of outplacement and its length vary too, with high-level executives typically getting one-on-one job-hunting help for up to a year and administrative assistants getting three-day group workshops.
The U.S. is nearly alone in not requiring severance. While some employees get substantially less than others, companies are not required to give severance to anyone. There is no law in the United States that compels the payments. Interestingly, however, the United States is nearly alone in not legislating severance. Employees stung by stingy severance here in the states might consider moving to Puerto Rico, which requires that employees with one to five years of service receive one month plus one week per year of service. Employees with 15 or more years receive three months plus one week per year of service.
Spain’s severance is generous too — 20 to 45 days per year of service. Workers, and particularly older workers, also make out well in the Netherlands. Severance there for employees over the age of 50 is two months for every year of service. In Peru, severance averages one to one-and-a-half months for each year of service. The United Kingdom is at the low end of the international severance scale, paying support personnel on average one month of severance and executives three monhs.
Grace Polhemus, vice president of business development for Lee Hecht Harrison, says that while U.S. companies are not required to pay severance, most recognize that doing so — and doing so generously — is good business. Treating dismissed workers well helps to establish a company’s reputation as a good place to work. It is also comforting to those who remain after a mass lay-off. "The message to other employees," says Polhemus, "is it’s worth taking a risk and staying."
Some employees write their own severance checks. Sheree Butterfield is an account manager with Drake Beam Moran, an international outplacement company with offices in Forrestal Village. Typically, outplacement firms work both with downsized workers and with the companies that have cut them free. Butterfield spends her time with the latter, advising them on lay-off policies, including severance formulas. She sees those formulas changing in some of the same ways that patterns of work are changing.
Now, says Butterfield, employees at a mid-management level or higher are not counting on employer generosity at leave-taking time. "It’s now part of a negotiated employment contract," she says. "This trend started three years ago. These people have been downsized. They’re not naive anymore." Thinking ahead to the day they will be cut, some executives — and many professional workers too — do not sign on for a new job until a severance package has been agreed upon.
Companies rethink loyalty as a severance criterion. Another trend is a rethinking of the whole philosophy behind severance. "In the past," says Butterfield, "severance was perceived as payment for past loyalty. Now companies look at severance as a bridge to the next spot." That is what the financial buffer was designed for in the first place, she says, "and then it became a reward for longevity."
Longevity doesn’t matter so much any more. Butterfield sees local companies hiring even as their mass lay-offs are making headlines. This activity is what she calls "just in time hiring." Companies that in the past looked for candidates to groom and grow — candidates whose loyalty they might reward with a large severance payment down the road — are now looking for people who can step right in and work on a specific project. It no longer makes sense to reward an attribute that is losing value. And, what’s more, it is very expensive.
"When organizations let 1,000 people go, it can be $1 billion," says Butterfield. "We’re starting to see companies say `wait a minute, maybe we need a different formula.’"
Butterfield says corporate paternalism is not quite as all-encompassing as it once was. "Not all that long ago," she says, "people were offered a year of outplacement, or even unlimited outplacement. The notion was that you provided support until the person landed." No more. "Now," she says, "a lot of my customers just want to make sure a person is launched. Companies are beginning to say `I’m not responsible for nurturing them until they land.’"
Beyond philosophical considerations, companies, particularly in the boom years just past, were becoming annoyed at paying for 12-month outplacement packages for laid off employees who found new jobs in two months. Now the boom has slowed — although Butterfield says the recession’s effects are not all that bad in central New Jersey — and companies are more conscious of their bottom lines. Outplacement, an expensive item, is being pared from the six to twelve months that were common a few years ago to three to six months.
Retention bonuses keep employees in place until lay-off day. When word comes out that the axe is about to fall, employees tend to head for the exits. Sometimes pink slips are handed out at the same time that the press gets a whiff of a mass lay-off, but that is not always the case. "It’s hard to keep a lay-off secret," says Butterfield. For one thing, public companies have to report impending cuts to the SEC. While this disclosure is required by law, leaving companies no choice, many need the about-to-be laid-off employees to stay for a while. Projects need to be completed, and retention bonuses are one way to make that happen.
"Sometimes companies hold severance hostage," says Butterfield. An employee is told he will get, say, 10 weeks severance, but only if he stays on for another two months. In other cases, the bonus is paid on top of severance. Typically, says Butterfield, the bonuses get higher the longer an employee is needed. He might get 30 percent of his yearly salary if he stay for three months, and 50 percent if he stays for six months.
The agreements can vary by employee, with the most essential generally offered substantially more. The agreements are also top secret. Butterfield says two employees sitting side-by-side generally have no idea of what the other has been offered.
In boom times, retention bonuses are more common, and more generous. When the economy is down "the algorithm changes," says Butterfield. When employees are unlikely to find new work quickly, it is easier to keep them in place for a few more weeks or months.
Some employees see severance as a bonus. Butterfield says she is seeing employees try to preserve their severance payments for long-term goals. Some severance checks end up in children’s college savings accounts, others are invested for retirement.
Kim Trahan, an independent career counselor with offices in Belle Mead and Princeton, is seeing the same thing. But with a twist. "Companies sometimes pay severance as an annuity," she says. The money goes into an employee’s retirement fund, thereby reducing tax liability. That also means it is not available to fund living expenses, leaving downsized workers to rely on savings and state unemployment benefits, which are not reduced when severance is paid.
Getting by on unemployment is a trick few central New Jersey residents can pull off. Those without fat trust funds or spouses with stable, well-paying jobs, might do well to draft a pre-employment severance agreement before accepting their next job. If that is not possible, the next best thing could be researching your prospective employer’s severance package. It could mean the difference between a nice, soft landing, perhaps complete with an extended vacation, and a jarring thud leading to a mad scramble to come up with the next mortgage payment.
#h#How to Manage Career Transitions#/h#
Downsized workers do not generally make great job hunters. "They’re feeling trampled. They’re not seeing all of their gifts," says Linda Sepe, a personal and business coach now getting calls from people who have recently gotten the tap on the shoulder. "It’s not as bad as it was four years ago," she says of the new crop of lay-offs in central New Jersey, but for those affected it is bad enough. No matter how long "downsizing" has been part of the business vocabulary, no matter how many stories of mass lay-offs make headlines, individuals are still shocked to see their own personal pink slip.
"A woman called just yesterday," Sepe recounts. "One month ago she had been told her job was absolutely secure. The day before yesterday, she was laid off." The newly unemployed woman has two children in college. Fortunately, she also has a spouse in the workforce, and therefore, a little maneuvering room. "She’s considering a whole different set of interests," Sepe says. "In just one day, she did an assessment and realized all the advancing she had done was because of hard won skills, but also because of flattery." She enjoyed the flattery, and happily accepted the promotions she was offered, but didn’t especially enjoy the work they brought her. "It didn’t fascinate her," says Sepe. The woman will be working with Sepe at identifying just what kind of work will.
About half of Sepe’s clients are in career transition, and many of the rest are individuals with attention deficit disorder, who recognize, perhaps because they see their children struggling with the hereditary condition, that their career progress is being impeded by characteristic ADHD behaviors, which include difficulty with organization and time management. Sepe has been coaching this mix of clients for seven years. She speaks on "Smart Ideas for Developing Your People and Yourself: Coaching the Soul," on Tuesday, March 5, at 7:30 a.m. at the Main Street Bistro in the Princeton Shopping Center at an event organized by Lindenberger Group Consulting. Judith Lindenberger speaks on "The New Rules of Mentoring" at the event. Cost: $75 for one talk, $100 for both. Call 609-730-1049.
Sepe, a graduate of Syracuse University (Class of 1964), has been through career transitions herself, accumulating diverse skills along the way. In the late 1960s and early ’70s, she worked in educational research for the Syracuse Research Corporation. There she developed an alternative to the G.E.D. test that confers a high school diploma on adults who never finished high school. At that time, she recalls, "more than half of the adults in New York State did not have high school diplomas, and more than half of those people were women."
Sitting for the test was terrifying for women who had been out of the classroom, and very likely in the home, for decades. Sepe developed an alternative, an applied test mechanism. "We asked them to measure a room. We said `How would you purchase a major appliance?’" So successful was the program that Sepe traveled around the country teaching education departments how to administer it.
After the birth of her son, now a freshman at Rutgers, she took her career in another direction. "I’m a foodie," she says. "I started a cooking school and catering business." She ran the business for six years before selling it to her partner and moving to New Jersey in 1990. Here she worked for the Private Industry Council and then for the Mill Hill Child and Family Development Center in Trenton.
Then an encounter in the sweet potato aisle of her supermarket changed her life. "A friend told me about coaching," she says. Back then, in 1995, the concept of coaching was new on the east coast. Sepe learned that the Newgrange School was holding the first coach training program in the area, and she signed up.
"There are many natural coaches," Sepe says. "You know if you’re one of them." She knew. Right away. "I knew that was what I was doing when I was teaching cooking and developing new education programs," she says. "I was just a natural. I started immediately." Within two months, her Hopewell-based practice had a solid roster of clients.
Sepe says she couldn’t be happier in her work, and it is now her mission to help clients say the same thing. It isn’t always easy, especially when the sting of a lay-off is fresh, but she suggests the following steps:
Be glad. Yes, it can sound cruel. And, yes, it has become a platitude. But lay-off veterans often say the push out the door was the best thing that ever happened to them. Says Sepe, "think about the lay-off as a wonderful opportunity to reassess what you want, need, think, and value, and about all the skills you have."
She acknowledges that this is not easy. "It’s a monster transition," she says, a major life event, right up there with marriage or with integrating an elderly relative into a home full of teen-agers.
Try not to act out of a singular need. Some people declare that their goal is to get a job that pays $150,000. Period. Completely focused on that narrow goal, and in a big hurry to achieve it, they miss a trove of opportunities. "I’ve coached people who have made bad decisions," says Sepe. "The were thinking only about the need, and the speed. They say `I’ll take any job for $150,000.’ They’re not confirming all of their skills and energy to focus on a new enterprise."
Talk out loud. Sepe advocates a kind of networking that is different from the get-an-in-at-a-good-company kind that is what most think of when they hear the word. She suggests reviewing all the of things you most enjoy, and then talking to people who are doing them. "It gets your imagination running," says Sepe. "You think of the world in a whole new way."
Scan all your skills. The market for the skill that has brought you a paycheck may have shrunk — or disappeared. Don’t panic. "Maybe," says Sepe, "you know more about roses than anyone else." You are more than a retail executive or a bank officer. Look to all of your skills for career ideas.
Make a schedule. Write down all the hours you are awake, subtract necessary activities, things like eating and driving the kids to school. Then make conscious decisions about what to do with the remaining hours. Decide, for example, to work on the job search from 9 a.m. to 2 p.m., and to devote specific segments of the rest of the day to exploring new activities, catching up with old friends, taking a class, or hanging out with your kids.
This is especially helpful for anyone who has been booted from a job. It is all too easy to fall into depression. "When you lose a job, you lose control. You lose focus," says Sepe. Using time productively — and pleasurably too — provides a sense of control, and satisfaction.
Move around. "Exercise, exercise, exercise," says Sepe. Strenuous physical activity releases endorphins, providing a powerful sense of well-being. Downsized workers need all the endorphins they can get.
When clients get in touch with Sepe right after a lay-off, they are, she says, "in a state of confusion." Many have no idea what to do next. When clients arrive after weeks — or months — of unemployment, they are "much more discouraged."
Sepe’s goal is to replace confusion and discouragement with possibilities. "I ask hard questions," she says. In doing so, she prompts people at a difficult time in their lives to discover what it is they are truly meant to do. What will get them out of bed each morning with energy and enthusiasm.
Those who are open to all options may be lucky enough to find themselves in front of a bin of sweet potatoes at just the right minute, and to seize upon an interesting option. Just as Sepe did.