Global severance policies and practices report
Since 2022, businesses around the world have felt the impact of inflation on a variety of fronts, most notably regarding their financial results and daily operations. For many companies, cost control will remain a practical reality for the foreseeable future.
While many employers expect business performance to remain on-target, a certain portion expect challenges and, for some employers, that will translate to reductions in force (RIFs), according to WTW’s 2023-2024 Severance Policies and Practices Report.
RIFs go by a variety of names globally such as collective dismissals, redundancies or retrenchments. Whatever the terminology, RIFs are one of the most difficult aspects of managing staff. First and foremost, it obviously is a disruption for departing employees. However, depending on how the RIF is managed and perceived, the effects also can reverberate across an organization’s entire workforce.
Along with the obvious human aspect, there also can be a variety of regulatory, cost, cultural and image-related considerations at play. For employers conducting dismissals in multiple jurisdictions, the process can be highly complex in one location and deceptively simple in another.
Global policies to observe only statutory requirements may seem practical in theory, but the outcomes of such policies can be difficult to reconcile when severance and notice requirements are substantial in one location but minimal or absent entirely in another. As a general rule, the more substantive the notice and severance requirements, the less that employers are inclined to offer benefits in excess of “statutory requirements.” At the other end of the spectrum, where there are little or no significant requirements, “market practice” is a common frame of reference.
Between those extremes exists a lot of obscurity, and that’s where practice data helps. A common cliché is two weeks’ pay per year of service, but that simple formula raises other questions like, “up to how many years of service?” or “what should be considered ‘covered pay’?”.
Employer practice is a significant element for the eight jurisdictions surveyed, even if severance and notice requirements vary considerably among jurisdictions or within the local legal framework for individual versus collective dismissals. Having a clear understanding of both statutory requirements and market practices is critical for organizations as they assess their future business needs against the skillsets of their current workforce.
