Shifting layoff protocols: How employers are safeguarding their brand appeal
Employers are modifying severance packages and staff-exit policies as they look to guard against sloppy layoff protocols and protect their brand reputation as a destination for top talent.
About 70% of companies in the U.S. and Canada enhanced separation and severance packages in the past three years, and over 90% said they reviewed their policies, according to a new report from talent solutions provider LHH based on responses from 700 HR leaders in the U.S. and Canada.
The tweaks come amid a changing tech and talent landscape, with AI expected to reshape the nature of many roles — meaning AI-related layoffs may become more common in 2025 and beyond. “We’re going to have to shift the workforce a bit. We’re going to have to get different kinds of people in to deal with this technology,” said Cary Cooper, professor of organizational psychology and health at the University of Manchester.
Employers are all too aware of the importance of maintaining a positive employment brand, so many are tightening their severance policies in preparation. Workers today aren’t afraid to air their grievances and share poor experiences getting the boot at specific workplaces on TikTok, Linkedin and Glassdoor. And more employers don’t want to get caught on the back foot.
It’s largely an image management issue, Cooper said. “I think a lot of companies are very conscious that to attract the next generation of workers, they can’t be seen to be people who just dump people,” Cooper added.
“If you enhance the separation package or severance package, you’re likely not to have that kind of a problem,” Cooper said.
Standard severance packages traditionally include an extension of pay and healthcare coverage for an amount of time post-exit. But that amount of time can vary widely by organization, and often does by tenure as well. Such agreements are also used to protect companies from wrongful termination suits.
One example of a more generous package recently promoted by an employer comes from Dropbox, which announced it was cutting 20% of its workforce, or over 500 employees, last month.
Those staff were eligible for 16 weeks of pay, and one additional week of pay for each completed year of tenure, to keep them afloat while they look for other roles outside the organization, according to a statement from the CEO relaying the news. Those staff will also receive their Q4 equity investments and will have remaining PTO credits paid out.
“If you bolster the severance offerings and you’re communicating benefits effectively, then you are strengthening brand reputation while reaffirming support to both outgoing and remaining employees,” said Russell Williams, svp for North America career transition and mobility at LHH.
Some widely adopted changes to severance programs from the LHH report include increasing formalization and documentation of exit policies. In 2017, 30% of employers said they had no written documentation about their separation and severance policies, compared to just 3% this year. Clearer formulas are also a trend, with just 4% of companies reporting they had no set formulas in place this year.
“Where some companies may have preferred to handle it on a case-by-case basis or had simply put it off, the recent economic climate and potential for poor publicity helped them take action,” that report said.
Another trend in separation programs is growing attention toward outplacement programs. Over 80% of HR leaders in the survey said their companies recognize outplacement services as a key tool to prepare employees for career transition before separation.
Outplacement programs include services that offer outgoing staff job search training, career coaching, resume help, and other tools and resources to help them land other roles.
Even as they change exit strategies, many employers are also looking for more ways to keep staff on through redeployment programs. More than 8 in 10 HR leaders are considering reassigning workers as an alternative to layoffs, according to another report from LHH out in September. The share of HR leaders with redeployment initiatives in place has increased by 25 percentage points since last year, and is now at 47%, indicating a growing trend toward retaining and reskilling talent, according to that report.
“It’s not just about letting people go anymore, it’s ‘how do we put in a redeployment initiative?’” Williams said.