22 January 2014

Formal severance policies dominate in Asia Pacific: Right Management

Right Management, a global outplacement provider, has observed that companies in Asia Pacific show a noticeably higher incidence of formal policies—particularly in Japan (94%) and China (92%).

A new global report commissioned by the company titled Severance Practices Around the World notes that when asked if their company had a formal, written severance/termination benefits policy, 75% of respondents globally said yes, with another 32% claiming an informal or unwritten policy, or a general practice.

Source: Right Management. Click here to view the full infographic.

In Asia Pacific, the incidence of companies which had a formal policy numbered 82% against numbers in the low 70s for both the Americas and Europe. A further 34% said they had informal policies, while 18% said they were guided instead by the law.

Severance is essential as it impacts not only those who are leaving, but also those who remain and individuals who might be attracted to the company in the future, said Right Management.

To attract talent, the company suggests that businesses should develop a value-based talent management strategy that “aligns compensation, rewards and severance practices and positions the business as an employer of choice”. “Leverage this strategy in your recruitment efforts to attract the best and brightest talent in the market,” said authors of the report.

A good severance policy will also help the business to retain high-Value employees, added the company. “Demonstrating fairness and concern and providing equitable severance for departing employees sends a positive message to those who remain. Should they find themselves in a similar position in the future, they know that the organisation will treat them with dignity and respect and support them with the benefits that help them transition to a new opportunity,” the authors explained.

A third advantage of putting a good severance strategy in place has to do with the talent remaining in the company. “Many are watching the company, its leaders and their own managers to observe how separated employees are treated. Employees will remember not only what you did, but how you did it.” said the authors.

Ensuring transparency about separation policies and practices means that there is little room for conjecture and misinformation to spread, and a greater chance that all employees will trust that their company will treat them fairly, consistently and in good faith, said the authors.

The report advises readers to develop a plan to ensure everyone is well informed about all benefits and advantages included with the provision of outplacement as employees who have been with a company for a long time may not be aware of what the job market wants, best practices for landing a new opportunity, nor even about new ways to apply for a job.

"The increasing importance of talent to an organisation's success has created a new focus on how severance practices, as part of a broader workforce strategy, can impact a company's brand value," noted Bram Lowsky, Right Management's Group Executive Vice President and Global Head of Career Management. 

"The need to continually realign and right-size talent persists in today's uncertain economic environment, and companies that have competitive severance practices in place are ahead when it comes to future retention and recruitment efforts and engagement of remaining employees after a restructuring.

"Regardless of location and industry, we're seeing an evolving and strengthening connection between competitive severance practices and favorable brand image in the marketplace. Organisations that provide outplacement support and demonstrate fairness, care and respect for those leaving not only ensure a positive restructuring outcome, but also realise an improved brand value that ultimately attracts new and retains current employees."
*Input was gathered from 1,859 senior leaders and human resource executives in 19 countries via an online survey between April and May 2013. Right Management sponsored the study, and the research was executed by a third-party firm, US-based International Communications Research. The organisations surveyed were not selected by Right Management, although some clients may have been included in the survey sample. The respondents included 528 from the Asia Pacific region, specifically from Australia, China, Hong Kong, India, Japan and Singapore.