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Institute for Workplace Studies-----------------Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor--------------------Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

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WorldatWork (Total Rewards Association)

 

SEVERANCE AND CHANGE-IN-CONTROL PLANS [November 2014]

http://www.worldatwork.org/adimLink?id=76187

[full-text, 28 pages]

 

This report summarizes the results of a June 2014 survey conducted by WorldatWork and Innovative Compensation and Benefits Concepts LLC to better understand and report on the changing landscape of severance practices. Specifically, the research is designed to better understand the recent trends affecting severance programs within member organizations and update data gathered between 2003 and 2011. This is the sixth fielding of this survey.

 

Table of Figures

Demographics

Figure 1: Organization sector........................................................................................................................... 4

Figure 2: Organization size .............................................................................................................................. 4

Figure 3: Industry............................................................................................................................................. 5

 

General Severance Non-Change-in-Control Plan Information

Figure 4: Reduction in force in the past 12 months ......................................................................................... 8

Figure 5: Anticipation of reduction of force .................................................................................................... 8

Figure 6: Severance plan coverage................................................................................................................... 9

Figure 7: Severance plan documentation ......................................................................................................... 9

Figure 8: Calculation of severance benefits..................................................................................................... 10

Figure 9: Definition of “cash compensation” for severance purposes............................................................. 10

Figure 10: If bonus is included in definition of ‘cash compensation,’ how is bonus defined.......................... 11

Figure 11: Current formula for determining the amount of cash compensation for severance purposes......... 11

Figure 12: Tiered severance pay plans............................................................................................................. 12

Figure 13: Minimum amounts given in a severance situation.......................................................................... 12

Figure 14: Maximum amounts given in a severance situation......................................................................... 13

Figure 15: Outplacement benefits .................................................................................................................... 13

Figure 16: Duration of the outplacement benefit ............................................................................................. 14

Figure 17: Type of outplacement benefit provided.......................................................................................... 14

Figure 18: COBRA subsidy ............................................................................................................................. 15

Figure 19: COBRA subsidy period .................................................................................................................. 15

Figure 20: Duration of continued medical coverage ........................................................................................ 16

Figure 21: Last formal review of the severance plan/policy ............................................................................ 16

Figure 22: Amount of severance compared to two years ago .......................................................................... 17

 

Change-in-Control Features for Corporate Merger, Acquisition or Divestiture

Figure 23: Severance eligibility in a change-in-control situation .................................................................... 17

Figure 24: Last formal review of the change-in-control policy ....................................................................... 18

Figure 25: Eligibility policy for accelerated vesting upon a change in control................................................ 18

Figure 26: Accelerated vesting or accelerated payout under a SERP .............................................................. 19

Figure 27: Executive gross-up for the golden parachute excise tax................................................................. 19

Figure 28: Definition of “good reason” for termination after a change in control........................................... 20

Figure 29: Requirements to the definition of “good reason” ........................................................................... 20

 

Severance for the Top Executive

Figure 30: Definition of “cash compensation” with regard to severance for a top executive .......................... 21

Figure 31: Top executive severance plans and bonus definitions.................................................................... 21

Figure 32: Top executive bonus calculation..................................................................................................... 22

Figure 33: Duration of cash compensation for top executives......................................................................... 22

Figure 34: Severance payout for top executives .............................................................................................. 23

 

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