With all the talk about layoffs, separation agreements have moved front-and-center to the discussion on how companies can reduce their liability exposure.

But how much severance should a company offer to its employees when laying them off?

There is, of course, no set rule in Connecticut — or the United States — on how much severance is warranted under the circumstances. But one study released last week suggests some benchmarks.  (H/T to Pennsylvania Labor & Employment Blog and Compensation Force).

The survey, by Right Management, found that U.S. employees typically earn the following amounts of severance (which represents mean weeks of severpublic domain - from wikipedia common imagesance for each year of service)

Voluntarily Separated:

  • Top Executives – 2.76
  • Senior Executives – 2.23
  • Department Heads/Managers – 1.55
  • Professional/Technical – 1.39
  • All other employees – 1.23

Involuntarily Separated:

  • Top Executives – 3.04
  • Senior Executives – 2.49
  • Department Heads/Managers – 1.78
  • Professional/Technical – 1.60
  • All other employees – 1.44

In advising employers, several seem to have adopted the one week or two weeks per year of service formula.  But in doing so, the employers provide the severance only in exchange for a full release of claims by the departing employee. 

Just be sure that when setting up the release, that you comply with the various rules associated with such agreements, including the OWBPA.  

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  • Thanks for the advice. I’m a huge fan of severance in exchange for a release. If you are terminating someone, you want him to go away. Giving a little money to do so goes a long way in making that happen smoothly.

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