Why a comprehensive severance package matters

Having to let employees go is never easy but, unfortunately, it is necessary sometimes. However, this pain can be eased, for both the employee and the employer, with a solid severance package.

In this article, we’ll have a closer look at the legal regulations that surround the dismissal of workers and how you can make the best of a bad situation. How should you act as an employer and what rules do you need to take into account? We’ll also look at three other European countries – France, Germany, and the Netherlands – and see how dismissal packages are dealt with there. Further into the article, we’ll discuss why offering a decent severance package is so beneficial. 

UK companies are obliged to offer statutory severance payments which are based on age, income, and length of service. However, there are limits on the maximum amount. The notice period here is shorter than in the other three countries we’re focusing on, which provides much more flexibility for workers.

According to the UK government, workers being made redundant or laid off are entitled to:

• redundancy pay, known as ‘statutory redundancy payment’
• a certain notice period
• a consultation with the employer
• the option to move into a different job within the company
• time off to look for a new job

Employees also can’t be dismissed because of age, gender, disability, or pregnancy, as this can count as unfair dismissal. To remain eligible, they should have worked for the company for at least two years.

It isn’t a one-size-fits-all approach in the UK, as statutory redundancy pay rates are based on the age of each employee and their length of service, counted back to the date of dismissal.

So let’s set it out clearly, according to statutory rules and regulations.

Employees receive:

• 1.5 weeks of pay for each full year of employment after their 41^st birthday
• a week’s pay for each full year of employment after their 22^nd birthday
• half a week’s pay for each full year of employment up to their 22^nd birthday

The length of service is capped at 20 years, with weekly pay being capped at £700, and the maximum amount payable is £21,000. The weekly payment of each employee is the average they earned per week across the 12 weeks before the day they got the redundancy notice.

But there’s nothing to stop you, as the employer, from forking out extra redundancy pay or changing the qualifying period to under two years.

More and more employers are opting to include outplacement services  to severance packages as an extra bonus. One of the huge benefits of outplacement is that each departing member of staff receives professional help in finding a new job.

How do the rules in the UK compare to other countries in Europe? Research by SCMR, commissioned by Careerminds, shows that legal frameworks surrounding redundancies differ from country to country. 

Let’s take a more detailed look.

Transition payment in the Netherlands is mandatory and equates to a third of a month’s salary per year of service, capped at €89,000 or one year’s gross salary, whichever is higher. For example, if your employee has worked for your company for four years with a monthly salary of €3,000, they would be entitled to €4,000.

These funds can be directed towards retraining or outplacement, demonstrating the emphasis on workforce reintegration. This approach dovetails with the Netherlands’ leanings towards lifelong learning and workforce adaptability, and ensures that departing workers receive financial support during their career transition.

Dismissal is also regulated by law in France, but is less lucrative for the employee than their Dutch counterpart. Extensive discharge and transition plans are required, which often include outplacement programmes. The minimum transition compensation in France is set at a quarter of a monthly salary per year of service, so the same employee earning €3,000 a month would receive a month’s salary i.e. €3,000, as opposed to €4,000 if they worked in the Netherlands.

France does have complex labour laws that force employers to either consider redeployment or provide significant support during the dismissal process.

Here, transition payments or severance packages are not mandatory. Compensation is often negotiated voluntarily in order to avoid lawsuits, with the Works Council playing a big part in this. This results in improved dismissal conditions for employees in unionised sectors or major companies. In practice, severance pay in Germany often amounts to half a month’s salary per year of service, with a great emphasis on retraining programmes.

Dismissal package per country	Legal notice period	Transition payment / severance payment	Additional benefits for employees
The UK	1 week per year of service, up to a maximum of 12 weeks.	Based on age and years of service, employees are entitled to statutory redundancy pay if they’ve worked continuously for the same employer for two years or more.	Consultation period required.
Germany	4 weeks to 7 months, depending on age and years of service.	Not mandatory to avoid lawsuits. Usually half of monthly salary per year of service.	Retraining programmes are common.
The Netherlands	1 – 4 months, depending on years of service.	A third of monthly salary per year of service, with a maximum of €94,000.	Employees can be offered outplacement services.Employers can spend part of the transition payment on outplacement or retraining programmes.
France	1 – 2 months, depending on years of service.	A quarter of monthly salary per year of service for less than 10 years of service.Minimum of a third of monthly salary per year of service with 10+ years of service.	Mandatory relocation effort.In case of collective redundancies, social plans with outplacement and retraining programmes are required.

In the UK and Germany, outplacement is slightly behind as well as being dependent on the sector and size of the company. In both countries, larger organisations are more likely to offer outplacement. In the UK, companies depend on solutions from the private sector, whereas in Germany outplacement is stimulated by the government.

In France and the Netherlands, outplacement is often a regular part of the dismissal package, with a stronger emphasis on employee wellbeing.

While no-one wants to be offboarded, the stress can be relieved somewhat with a helpful redundancy package. And this works both ways, with the benefits of outplacement working for the employee as well as the employer.

Below is a list of the most important benefits that a dismissal package with outplacement can bring.

Finding a new job is quicker – finding a new role can take a year, on average. Not so with outplacement. Participants on the Careerminds outplacement programme secure new roles, on average, in under 12 weeks.

Negative emotions can be transformed – when you’re dismissed, it can leave you feeling sad, angry, fearful, or uncertain about the future. Outplacement services can help assuage any negative emotions, as employers strive to support employees to find new and meaningful positions as quickly as possible.

Tailored support – top quality outplacement providers, like Careerminds, offer a customised service, which translates as tailoring their services to the position, level, and requirements of each participant. At Careerminds, participants receive personalised coaching and guidance support which is perfectly suited to meet specific needs, locations, and timetables.

Protects the employer brand – news of redundancies can spread like wildfire, potentially damaging the company’s image. But with outplacement, you’re sending a clear message that you care about your employees, even after a spate of redundancies. This protects your company brand.

Reduces stress – outplacement helps reduce stress for all of those involved in the layoff. You’re not leaving employees to fend for themselves, but are offering them a helping hand towards their next career adventure.

Increases the morale of remaining employees – dismissals or staffing restructures can have a negative impact on remaining members of staff, as they start to worry about their own job security and feel guilty about those who have been dismissed. Offering outplacement shows that you hear their concerns and, if the same thing happened to them, they know they’d be taken care of. This subsequently increases the morale and loyalty of remaining employees.

Reduces the risk of legal action – an employee on the warpath who doesn’t agree with the dismissal may take legal action. Defending a dismissal is expensive, time-consuming, and can damage your company reputation. Outplacement reduces the resentment and fear among laid-off employees, therefore reducing the risk of legal action.

If your organisation is considering outplacement services, contact us at the earliest opportunity to find out more. If you would like to read the entire Careerminds outplacement report, you can download it here.