Both Sunday's announcement by Walmart to cut 10,000 Sam's Club jobs and the Department of Labor's latest report of the still growing state unemployment rates are evidence that our economy is far from turning around.
As companies continue to scale down, the resources they maintain are forced to assume greater responsibility for ongoing business functions. Also very important as companies continue to shrink is the regulatory compliance of these ongoing functions, primarily within Human Resources, an area often posing significant risk to employers during periods of large force reductions.
Severance management is a Human Resource function which, when outsourced, can significantly relieve a business of the necessary yet burdensome administration involved with both big cutback and minor reorganizations. Providing meaningful benefits and quality care to terminated employees can be difficult for a changing business. Outsourcing program design and payment processing frees a company's internal resources to concentrate on more pressing business issues, and more importantly, providing terminated employees with expert support and constant contact has proven to reduce the risk for a termed employee to bring forth litigation or other less desirable behaviors upon the former employer.
Outsourcing HR functions has become a best practice. An outsourcing partnership with a severance management expert can provide a struggling business with relief at a time when relief is welcome.
Monday, January 25, 2010
Monday, January 11, 2010
Benefits for Main Street
A $154B bill is headed for volley on the Senate floor, earmarked for new construction and education spending, where the government hopes to create new jobs and prevent further job losses. Half of this bill's funding is slated to extend programs for 'Main Street' poor and unemployed through June. Being that the latest report from the Labor Department details December's 85,000 nationwide job cuts, this bill highlights not only the massive destimulation of the economy but is also evidence for improved jobless benefits for the seven plus million Americans forced into unemployment since December of 2007.
Jobless benefits provided by both a worker’s state and former employer can range from a pittance to a mountain of money. In our no-hire economy, many on the less fortunate end of this spectrum now face expired state benefits and exhausted severance. President Obama has just signed into law a two-month unemployment benefits extension, evidence that state benefits are, in fact, expiring throughout the country, forcing a great number of Americans into dire financial straits.
Not government-regulated, company-paid severance benefits for some were nonexistent and for others an abroad vacation and renovated kitchen. If more efficiently designed to parallel government funding, separation benefit plans can effectively extend benefit payouts received by each worker and better balance layoff packages with the financial needs of the company. By utilizing funding such as Obama’s unemployment extension to expand the pool of available severance funds, enhanced benefits can be made available for all beneficiaries. In such a risky economy, providing jobless benefits is practically (and should be) a necessity…lessening risks faced by terminated workers by better balancing the funding of these benefits should be a requirement.
Jobless benefits provided by both a worker’s state and former employer can range from a pittance to a mountain of money. In our no-hire economy, many on the less fortunate end of this spectrum now face expired state benefits and exhausted severance. President Obama has just signed into law a two-month unemployment benefits extension, evidence that state benefits are, in fact, expiring throughout the country, forcing a great number of Americans into dire financial straits.
Not government-regulated, company-paid severance benefits for some were nonexistent and for others an abroad vacation and renovated kitchen. If more efficiently designed to parallel government funding, separation benefit plans can effectively extend benefit payouts received by each worker and better balance layoff packages with the financial needs of the company. By utilizing funding such as Obama’s unemployment extension to expand the pool of available severance funds, enhanced benefits can be made available for all beneficiaries. In such a risky economy, providing jobless benefits is practically (and should be) a necessity…lessening risks faced by terminated workers by better balancing the funding of these benefits should be a requirement.
Monday, January 4, 2010
In Recovery? Not Quite Yet
Early in 2009, economists projected the unemployment rate would exceed 10% by year-end. By midyear, these economists finally agreed the country was in a recession state. In October, the unemployment rate met expectations as it hit 10.2%, and several states reported rates ranging from 12-16%. The year closed with an unexpected slight decrease in the number of newly unemployed workers filing for state unemployment benefits, and some recent economic indicators suggest the national unemployment rate has now finally hit its peak and the country is creeping toward recovery.
This might seem like good news for the nation. Today, however, the Bureau of Labor Statistics reported nearly 20 of the country's major metropolitan areas have unemployment rates higher than 15%, and 125 report rates higher than 10%.
Another interesting report came on December 31, when the Labor Department reported a decrease in the rate of new unemployment benefit claims filed in the final weeks of 2009. And while the rate of new unemployment claims during these weeks was lower than anticipated, it might seem safe to assume that layoffs tend not to occur at a particularly swift rate when a good percentage of the workforce vacations or celebrates holidays.
It seems premature to assume economic recovery has begun. The housing market has reportedly picked up, although the homes selling are those foreclosed upon as banks finally begin to regain their footing. Holiday retail sales proved disappointing, and domestic automobile manufacturers are still experiencing declining profits. Economists are no longer predicting growth in the unemployment rate, but rather are suggesting there is potential for a "double-dip recession", or another economic downturn immediately following a brief period of growth.
We can expect more layoffs. We should expect this. And by using traditional severance plans, we should expect companies will each waste a few million more dollars.
This might seem like good news for the nation. Today, however, the Bureau of Labor Statistics reported nearly 20 of the country's major metropolitan areas have unemployment rates higher than 15%, and 125 report rates higher than 10%.
Another interesting report came on December 31, when the Labor Department reported a decrease in the rate of new unemployment benefit claims filed in the final weeks of 2009. And while the rate of new unemployment claims during these weeks was lower than anticipated, it might seem safe to assume that layoffs tend not to occur at a particularly swift rate when a good percentage of the workforce vacations or celebrates holidays.
It seems premature to assume economic recovery has begun. The housing market has reportedly picked up, although the homes selling are those foreclosed upon as banks finally begin to regain their footing. Holiday retail sales proved disappointing, and domestic automobile manufacturers are still experiencing declining profits. Economists are no longer predicting growth in the unemployment rate, but rather are suggesting there is potential for a "double-dip recession", or another economic downturn immediately following a brief period of growth.
We can expect more layoffs. We should expect this. And by using traditional severance plans, we should expect companies will each waste a few million more dollars.
Friday, January 1, 2010
A Look Back on 2009
As 2010 begins, it seems most of us hope for a year far less grim than 2009. Many who have managed to stay one step ahead of the corporate survival tool known as layoff still hold onto jobs white-knuckled while others not so lucky search relentlessly for the job that might not come for another month. As we look back on 2009 to analyze mistakes with resolve to avoid the same in '10, it is interesting to watch businesses do the same. Slightly more interesting when we realize that many of the business mistakes of 2009 were made with the intention of saving short-term costs, and are what have created the country's staggeringly high rate of unemployment. Some economists have claimed the national unemployment rate has hit its peak, yet dismal state unemployment rates ranging from 12-16% give evidence that the economy is quite far from recovery and perhaps such claims are a bit premature.
One of the highlights, and interestingly, huge business mistakes, of 2009 relates nicely to the scandal surrounding compensation and severance. Throughout the year we heard nonstop news rotations about "golden parachute" severance sums paid to highly compensated executives, or minimal severance provided to long-tenured employees laid off in massive cost-cutting initiatives, or sizable severance packages awarded to individuals with high reemployment potential. Daily reports came in from hundreds of companies reducing headcount by thousands to get salaries and benefit costs off the books. Should we think of what may be assumed was a very widespead use of severance in 2009 as a successful short-term cost-saving measure? Probably. As an avoidance of risk? Somewhat. As a balance of interests? Not really. Strategic tool for the economic recovery that will eventually arrive? Not at all.
Severance does provide immediate cash savings, and it has been shown to increase a company's protection from litigation by unhappy former employees. But severance does not consider the needs of employees, either those terminated or those often unfortunate enough to remain to do twice the work. Nor does severance put in place a strategy to protect a company from similar losses in the future.
In 2009, reported layoffs of approximately five million occurred across all industries. What one company offersed as a severance benefit typically differed significantly from what another provided, and some terminated personnel walked away with upwards of a year’s salary while others were lucky to receive a two-week payout. Two weeks' salary in any economy does little to support an employment transition. But 39 weeks? 52? 65? Here is the mistake. When a company seeks to cut costs, how might it be beneficial to pay anyone 52 weeks of salary in return for a signature on the dotted line? Seems a good deal for the person leaving, who, more often than not, will go back to work in approximately 26. What about those workers who are left to pick up the slack? Or the millions of shareholders whose returns are more greatly reduced because billions were spent on severance?
When layoff seems such an easy answer to a financial challenge, a business will typically take advantage of the in-place severance process when necessary without seeking potential alternatives. It seems to be forgotten during a layoff that when an employee is on a company's payroll, tax dollars are paid to federal and state agencies by the employer to cover potential unemployment benefit expenses for that employee. During force reductions, why don't companies take advantage of those dollars, already in place for such use, as supplemental funds when doing a layoff? The IRS offers benefit structures precisely for that purpose. To offset severance funds paid out by a company with dollars previously paid by that company in the form of taxes offers a company not only an immediate savings on that severance payout, but also a long-term tax advantage.
Think about it this way. Five million people are laid off and each person awarded two weeks of severance benefit. The former employer offsets each of these two weeks with state unemployment funds already paid into the unemployment system by the employer, let's say $200 per week. That's $40 billion saved. $40 billion which could have probably saved a few, maybe more than a few, jobs. Maybe some of it reinvested in the company to develop other employee-centric programs. Or strategize to avoid future financial black holes.
One of the highlights, and interestingly, huge business mistakes, of 2009 relates nicely to the scandal surrounding compensation and severance. Throughout the year we heard nonstop news rotations about "golden parachute" severance sums paid to highly compensated executives, or minimal severance provided to long-tenured employees laid off in massive cost-cutting initiatives, or sizable severance packages awarded to individuals with high reemployment potential. Daily reports came in from hundreds of companies reducing headcount by thousands to get salaries and benefit costs off the books. Should we think of what may be assumed was a very widespead use of severance in 2009 as a successful short-term cost-saving measure? Probably. As an avoidance of risk? Somewhat. As a balance of interests? Not really. Strategic tool for the economic recovery that will eventually arrive? Not at all.
Severance does provide immediate cash savings, and it has been shown to increase a company's protection from litigation by unhappy former employees. But severance does not consider the needs of employees, either those terminated or those often unfortunate enough to remain to do twice the work. Nor does severance put in place a strategy to protect a company from similar losses in the future.
In 2009, reported layoffs of approximately five million occurred across all industries. What one company offersed as a severance benefit typically differed significantly from what another provided, and some terminated personnel walked away with upwards of a year’s salary while others were lucky to receive a two-week payout. Two weeks' salary in any economy does little to support an employment transition. But 39 weeks? 52? 65? Here is the mistake. When a company seeks to cut costs, how might it be beneficial to pay anyone 52 weeks of salary in return for a signature on the dotted line? Seems a good deal for the person leaving, who, more often than not, will go back to work in approximately 26. What about those workers who are left to pick up the slack? Or the millions of shareholders whose returns are more greatly reduced because billions were spent on severance?
When layoff seems such an easy answer to a financial challenge, a business will typically take advantage of the in-place severance process when necessary without seeking potential alternatives. It seems to be forgotten during a layoff that when an employee is on a company's payroll, tax dollars are paid to federal and state agencies by the employer to cover potential unemployment benefit expenses for that employee. During force reductions, why don't companies take advantage of those dollars, already in place for such use, as supplemental funds when doing a layoff? The IRS offers benefit structures precisely for that purpose. To offset severance funds paid out by a company with dollars previously paid by that company in the form of taxes offers a company not only an immediate savings on that severance payout, but also a long-term tax advantage.
Think about it this way. Five million people are laid off and each person awarded two weeks of severance benefit. The former employer offsets each of these two weeks with state unemployment funds already paid into the unemployment system by the employer, let's say $200 per week. That's $40 billion saved. $40 billion which could have probably saved a few, maybe more than a few, jobs. Maybe some of it reinvested in the company to develop other employee-centric programs. Or strategize to avoid future financial black holes.
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