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Benefits to Offering Voluntary Severance

19 March
by Raymond Lee
2 minute read

During the tech bubble of 2001 and the recession of 2008, employers faced the need to downsize several rounds in their organizations in order to meet business objectives. The toughest part of a layoff or reduction in force (RIF) is figuring out who goes and who stays. In a first round of layoffs, performance usually is part of the selection process, but as you get further down the list, it becomes tougher to select and voluntary severance programs begin to be appealing to any organization. Voluntary separations have always had multiple advantages over involuntary programs. First, employees who leave voluntarily are less likely to sue their organization over their separation and are more likely to sign a release in exchange for severance and outplacement services, assuming it is offered.

Download our voluntary severance calculator here.

Voluntary severance programs appear to be increasingly popular among employers who have already undergone involuntary reductions. Again, voluntary severance programs usually make sense for employers who have already undergone deep cuts in their staff. By opening a voluntary severance program to several employees, companies can avoid the difficult decisions about whom to sever in an involuntary reduction in force.

However, voluntary programs don’t always produce the numbers a company is seeking. If only a few employees volunteer, involuntary cuts generally are still needed. I've seen companies sweeten the severance benefits with a longer runway for employees to transition and a richer outplacement program to help with landing their next job. If the employee feels comfortable about the transition, they are more likely to “raise their hand” and volunteer. If you’re worried about your top performers volunteering, keep in mind that the company has the right to deny applications on a case by case scenario. Check with legal counsel first before implementing such a process.

If you want to learn more about severance agreements, check out our free improvement guide:

Download Our Guide To Improving Severance Agreements!

For the reasons explained above, the benefits to offering voluntary severance program will usually generate fewer lawsuits and employees of the organization will generally feel good about the company’s willingness to let their employees decide who goes and who stays.

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