Severance period getting shorter

Layoffs are hard enough to swallow, but making matters worse is the fact that the average severance period for managers and executives is decreasing.

Outplacement firm Challenger, Gray & Christmas reports that the average severance period lasted just 10.5 weeks in 2002, the shortest severance period since the last recession when the firm began tracking severance data. The average length of severance has fallen by nearly 12 weeks since 1999’s high of 21.8 weeks.

 “This is undoubtedly troubling news for jobless managers and executives who took an average of 16 weeks to find new employment in 2002,” says John Challenger, CEO of Challenger, Gray & Christmas. “This means that the average job seeker is unemployed for six weeks after his or her severance is exhausted.” Challenger points out that layoff victims’ slashed consumer spending doesn’t bode well for economic recovery, nor does corporate hesitation to increase capital spending.

One obvious reason for severance cuts is the sputtering economy. Companies just don’t have the cash reserves to spend on providing long-term severance packages. Even worse, severance packages are rare for companies that are going through bankruptcy proceedings, and there are a lot of those firms today.

The following are examples of standard severance agreements, according to Challenger:

*Executives: One to four weeks of continuing pay for every year of service, with a minimum of six to 12 months.

 *Middle managers/technology professionals: One to two weeks of continuing pay for every year of  service, with a minimum of three to four months.

*Rank and file workers: One week of continuing pay for every year of service with a minimum of zero to one  month’s pay.

For more information about Challenger, Gray & Christmas, go to https://www.challengergray.com/customer_whoarewe.asp