Severance pay, outplacement support and other continuing benefits for terminated employees impact the morale of remaining employees, even affecting the company’s brand and public image, according to new research on separation benefits.

The study of more than 1,200 business leaders from 45 countries, conducted by DBM, a global outplacement firm, and the Human Capital Institute, a research group, reveals that most organizations (85%) provide severance to at least some of their employees, with almost half (45%) offering severance to all of their employees, including part-timers.

Other key findings include:

• Virtually all organizations reported problems resulting from a reduction in the workforce, particularly decreased levels of morale (71%) and reduced loyalty (62%).
• Companies place the greatest emphasis on departing employees (84%) and protecting the morale and commitment of remaining employees (82%) over financial considerations such as budget (68%) and return on investment (40%).
• Most organizations (81%) believe providing higher levels of separation benefits (such as severance pay, outplacement support and other continuing benefits) most significantly impact the morale and productivity of the remaining workforce.

Among those employers that provide severance support, 66% pay severance in lump sums instead of as continued salary payments. Just over half (54%) of respondents increase severance benefits for terminations resulting from organizational changes, such as mergers, acquisitions, closures, outsourcing and the sale of the company.

About half of companies provide senior executives and executives with three weeks or more of severance for each year of service. Managers and those below generally receive two weeks or more per year of service.

Outplacement services are provided to some terminated employees by 75% of companies with 100 or more employees. Among those that do offer outplacement services, the primary reason for doing so is corporate values (cited by 76% of respondents), while less than 10% identify labor relations or legal considerations as the rationale.

The level within the organization is the factor most often used to determine outplacement support, followed by years of service. More than half of companies (58%) increase levels of outplacement support under certain circumstances, such as mergers, acquisitions and facility closings.

“When employees leave an organization, they don’t just become ex-employees,” says Robert Gasparini, CEO and chairman of DBM. “Departing employees become customers, referral sources, competitors and perhaps even future employees returning to the organization. By well managing employee separation, companies can fortify loyalty and mitigate retention risk among the remaining workforce,” he adds.