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Article | Executive Pay Memo North America

2019 Severance Plan Design Survey results: market insights on severance design principles

By Stuart James and Chris Marques | September 30, 2019

Willis Towers Watson’s 2019 Severance Plan Design Survey offers insight into severance design features for all levels in an organization.
Executive Compensation

While pay-for-performance considerations continue to headline compensation-related discussions, another important focus area for compensation professionals is severance plan design. With an ever increasing demand for severance data for broad-level employee positions, due to publicly available information being primarily executive-based, this survey, which was completed in the spring of 2019 and includes submissions from 235 companies, provides valuable market insights on severance design practices for all organizational employee levels without a change-in-control (CIC) and in connection with a CIC. This survey delves into the following severance plan features:

  • Cash severance, including bonus treatment
  • Severance by employee group — minimums, maximums and multiples of pay for CIC
  • Treatment of long-term incentives — forfeited, accelerated vesting, continued vesting, actual versus target performance and double versus single-trigger in the case of a CIC
    • Benefit continuation prevalence and duration
    • Medical, dental and vision
    • Life insurance
    • Vacation
    • Perks
    • Outplacement assistance
  • Retirement — additional crediting prevalence
  • Restrictive covenants and duration

Prevalence and eligibility

As a preview of the survey findings, the overall prevalence and eligibility results presented are as follows:

  • 90% of participants have standard severance practices, either with or without formal written policies.
  • All full-time salaried employees are eligible for severance at a vast majority of organizations.
  • Hourly full-time employees are eligible for severance at slightly more than three-quarters of organizations.
  • Hourly part-time employees are eligible for severance at slightly more than half of organizations.
  • It is extremely uncommon for participants to extend severance eligibility to interns, students or temporary workers.
Prevalence of severance practices
Prevalence of severance practices

Source: Willis Towers Watson 2019 Severance Plan Survey

Survey results access

How do your severance plans compare to market? Do participants and investors agree that payouts are appropriate? Are you ready for 2020 planning discussions? Willis Towers Watson can help you answer these questions and more. We are now offering companies the opportunity to run custom peer group and industry cuts. For information on how you can purchase or run a custom cut of the results of the 2019 Severance Plan Design Survey, please contact your Willis Towers Watson compensation consulting partner, or reach out to Stuart James or Chris Marques.

About the survey

The 2019 Severance Plan Survey provides market insights on severance design practices without a CIC and in connection with a CIC based on submissions from 235 participants in North America (64% publicly traded, 88% U.S. headquartered). Willis Towers Watson conducted the survey based on data submitted by our clients and other participating companies.

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