U.S. firms provide the least generous severance packages, as talent scarcity encourages improvements: randstad risesmart severance report

November 7, 2023

A new study shows cash payouts, retirement benefits, and payment of earned bonuses are likely to be added to severance payments from U.S. firms as support for outgoing employees increases.

ATLANTA, Georgia – November 7th, 2023 – In today's dynamic business landscape, downsizing, layoffs and restructuring have become commonplace, and organizations worldwide are grappling with the challenges of managing severance policies. The 2023 Randstad RiseSmart 2023 Global Severance Research found that only 25% of U.S.-based firms surveyed offer severance to all employees, with most doing the bare minimum when it comes to supporting employees exiting the business, driven primarily by the requirements of labor laws.

The survey of over 400 human resources and procurement decision-makers across the United States, United Kingdom, Germany and Australia also finds that companies truly believe they are doing right by their displaced employees and have a continued focus on employees throughout the talent life cycle. Many organizations are building out their redeployment programs, a process whereby employees with roles at risk are given an opportunity to find an alternative role within the organization. The research shows some sectors are more progressive, with efforts around reskilling and retraining cited alongside redeployment. Still, global businesses must consider a more harmonized view of severance, as components of severance packages differ significantly by country.

Some 96% of companies across the four markets surveyed have initiated some form of downsizing action in the past 12 months, while 92% anticipate taking similar actions in the next year. Unsurprisingly over-hiring during and after the pandemic is the leading cause of layoffs, cited by 73% of respondents in the U.S., 69% in Germany, 58% in the U.K., and 51% in Australia. Other prominent factors causing firms to cut workforce numbers include AI and automation, strategic shifts in the organization, business downturns, and merger and acquisition activity.

loyalty left unrewarded in U.S. organizations

While almost half the firms surveyed in Australia, Germany and the United Kingdom typically offer severance to all employees, only a quarter of organizations in the United States offer severance packages to all exiting employees, with just 28% of U.S. companies offering this benefit to entry-level employees.

Of those offering severance packages, U.S. organizations tend to be less generous than other countries, with 37% offering a payout of 3-4 months of salary, where severance is calculated on number of months of salary, with other countries surveyed more likely to offer 5-6 months of salary.

Typically U.S. severance comprises health benefit continuation and retirement benefits, with useful services for outgoing talent (such as outplacement, reskilling and retraining) not featuring as highly.

Outplacement services, characterized by resume support, interview coaching and assistance with job search, are the most popular additions already made to severance globally. But positive news for U.S. employees shows 84% of organizations have made changes in the past three years and/or have updates underway.

“Our global research shows that downsizing continues to be top of mind for U.S. business leaders, and now more than ever, how they handle these reductions is key,” said Lindsay Witcher, global managing director, Randstad RiseSmart. “Businesses need to be agile and adapt to the changing market conditions, placing greater emphasis on reskilling and retraining existing employees. The status quo must be challenged by giving more consideration to redeployment, not just resorting to layoffs. But, if layoffs must be made, the way severance packages are constructed and the manner in which they are conducted are critical to keeping remaining employees engaged and protecting your employer brand reputation, not to mention doing the right thing by your departing employees.”

reskill to overcome AI-related layoffs

With 28% of U.S. organizations downsizing due to AI, and with that trend likely to continue over the next 12 months and increase in mid-size businesses, focusing on reskilling employees whose jobs are most at risk from AI can help avoid negative sentiment while helping those individuals reinvent themselves.

If this isn’t motivation enough to expedite the reskilling of workers most at risk to AI and automation, they are also the most likely to make negative comments in a public forum like LinkedIn or Glassdoor, as workers shed the taboo stigma of being laid off and now use it to their advantage to signal availability for the next opportunity.

the redeployment revolution: U.S. firms lead the way

With layoffs bringing with them the burden of negative press and issues on social media platforms, redeployment programs, in which employees are offered crucial new roles needed for future endeavors, represent a fresh start for both parties, supporting talent pool evolution. Effective redeployment programs are seen as crucial by leaders, with 46% of respondents rating them as very effective. Such programs are gaining prominence, with 40% of organizations expecting redeployment opportunities in the next 12 months.

reskilling and upskilling: sector approaches vary

The research underscores a clear need for employers across sectors to enhance their support for employees undergoing involuntary transitions, whether through layoff or internal redeployment.

Surprisingly, when it comes to support via layoff, technology firms are at the bottom of the list, with only 16% offering reskilling or retraining programs for employees navigating the competitive job market. This figure pales in comparison to the more robust support provided by high-end manufacturing (37%), life sciences and pharmaceuticals (28%), and banking and financial services (24%) organizations.

For internal redeployment, high-end manufacturing (53%) and technology (52%) sectors lead the charge in offering upskilling and retraining opportunities, followed by 42% of life sciences and pharma businesses. In contrast, a mere 36% of banking and financial services firms are ready to support internal transfers in a similar manner.

The contrast in support between sectors is stark, highlighting the need for technology companies, in particular, to step up their efforts in empowering laid-off employees during a crucial career transition.

2024: anticipated actions

With layoffs a theme for all sectors in 2023, the next 12 months appear to show that trend continuing, with 92% of the organizations surveyed admitting they plan some sort of workforce reduction in the next 12 months. Early retirement offers (34%), and reductions due to strategic shifts in the organization (31%) and AI/Automation (31%) are among the most likely actions to take place in 2024 for U.S. organizations.

Randstad RiseSmart's 2023 Severance Research is a vital resource for organizations seeking to navigate the complex landscape of downsizing, severance policies, and redeployment.

download the full report

about 2023 randstad risesmart global severance research:

This survey was conducted by a third party on behalf of Randstad RiseSmart. The research consists of responses of more than 400 human resources and procurement decision-makers in four markets; Australia, Germany, the United Kingdom, and the United States in Q3 of 2023.

about randstad risesmart:

Randstad RiseSmart is a leading specialist in career coaching and career transition solutions, operating under Randstad N.V. Our mission is to enable organizations to unleash possibilities throughout their employees' working lives. We offer a coaching-centric approach to support individuals at every stage of their employment journey, while also assisting businesses in onboarding, developing, redeploying, engaging, retaining, and transitioning employees.