The Evolution of Severance: How Companies Are Enhancing Their Packages to Attract and Retain Talent

By Sarah Dawson, Workplace Strategy Consultant

The world of work is undergoing a seismic shift, and with it, so are the standards surrounding employee severance packages. In today’s talent-driven market, severance policies are no longer considered an afterthought—they’re a strategic asset. Companies are increasingly enhancing their severance offerings, aiming not just to soften the blow of layoffs but to bolster their success in attracting, retaining, and redeploying top talent. Let’s dive into the growing trend of severance packages becoming more generous and strategic, and what it means for both employers and employees.

Key Findings: A Snapshot of the Evolving Severance Landscape

Recent data highlights how companies are reshaping their severance policies to meet new organizational and workforce needs:

• Increased Generosity: An astounding 70% of companies have enhanced their severance packages in the last three years, while only 11% have made reductions. These enhancements show a clear trend toward prioritizing employee well-being during separations (source).
• Standardization: Severance calculations are becoming more consistent, with only 4% of companies reporting a lack of standard formulas for determining benefits (source).
• Redeployment and Upskilling: 64% of organizations have opted to implement redeployment programs after conducting cost-benefit analyses of termination versus redeployment. This reflects a growing interest in helping employees transition to new roles within the organization or beyond (source).

Industry-Specific Trends: Who’s Leading the Charge?

While the shift toward more generous severance policies is widespread, the pace and focus vary considerably by industry. Here’s a closer look at some of the most notable trends:

Financial Services

In the financial services sector, 82% of organizations have either introduced or plan to introduce sweeping changes to their severance arrangements in 2024. This sector is leaning heavily into redeployment and upskilling initiatives, recognizing the financial and reputational value of treating departing employees with care (source).

Sector Variance

The generosity of severance packages also varies by industry. Leading the pack are media/entertainment and utilities/public works, sectors known for their robust severance offerings. This reflects differing priorities and workforce dynamics across industries (source).

Communication and Transparency: A Vital Component

A great severance package means little if it isn’t clearly communicated to employees. Companies are increasingly adopting a multi-channel approach, leveraging tools such as:

• Employee handbooks
• Online portals and self-service resources
• Direct communication via supervisors

However, companies must also navigate complex legal requirements like the Age Discrimination in Employment Act (ADEA) and the Older Workers Benefit Protection Act (OWBPA). Compliance is critical to ensuring fair and equitable treatment of all employees while mitigating potential legal risks (source).

The Employer Brand Impact: Why It Matters

In today’s hyper-connected world, the way companies manage layoffs can have a lasting impact on their employer brand. Enhanced severance packages can help organizations:

• Attract Top Talent: Generous benefits signal a company’s commitment to treating employees well, attracting high-quality candidates.
• Retain Employee Trust: A thoughtful approach to layoffs ensures that remaining team members stay engaged and loyal.
• Maintain Reputation: Well-handled separations can prevent brand damage from public backlash or negative online reviews (source).

In essence, severance is no longer just a cost-center—it’s a strategic lever that can shape perceptions and build goodwill long after an employee departs.

Conclusion

The days of cookie-cutter severance packages are clearly over. In their place, we see a more considered, strategic approach that seeks to balance business needs with employee well-being. By making severance packages more generous, transparent, and aligned with workforce trends like redeployment and upskilling, companies are positioning themselves as employers of choice in an increasingly competitive landscape.

For organizations looking to stay ahead, the question isn’t whether to enhance severance offerings—it’s how quickly they can adapt.