There's more to terminating an employee than sending him out the front door with some severance pay and the hope he can find a job quickly, according to Bruno Vassel, president of Human Resource Services Inc.
Taking the above action can cost a company a great deal of money, especially in unemployment insurance costs long after the employee has been terminated.Most Utah employers who lay off non-management employees add an average of $1,860 per terminated employee to their unemployment insurance costs over the next four years, he said.
Citing Utah Department of Employment Security figures, Vassel said the maximum amount of unemployment benefits a qualified laid-off person in Utah can receive is $5,746. That cost to the department can result in unemployment insurance increases charged back to the employer who terminated the employee of 100 percent of the $5,746, he said.
The average unemployed person in Utah takes more than 12 weeks to find another job, Vassel said. The average weekly unemployment paid by the department in 1989 was $155 per week. Multiply the $155 per week times 12 weeks which is $1,860 paid to each former employee.
That $1,860 is charged back to the terminating employer over the next four years in the form of increased unemployment insurance contribution rates, Vassel said.
Paying severance money to terminated employees does not reduce the possibility of incurring increased unemployment insurance costs, Vassel said. "Severance monies do help ease the pain felt by both company executives who must implement the layoffs and the terminated employees. The severance pay also helps the terminated employees pay for at least a portion of their bills and expenses during the following weeks," he said.
Severance pay doesn't help terminated employees get other jobs quicker. "In fact, severance pay tends to temporarily mask the urgency of the situation in the minds of the terminated employees. They often don't actively begin their job search until after their severance pay runs out," he said.
Many people have the impression that providing severance pay is the cheapest way for employers to terminate employees, he said.
The reason for almost all of the hidden costs to employers who terminate employees is because employees haven't received training in getting another job so they take longer than is necessary.
Vassel said some companies are trying to help their terminated employees by hiring outplacement firms to help the employees find other jobs. He claims these outplacement firms charge outrageous fees for each person receiving help.
To eliminate many of the hidden costs associated with terminating employees, Vassel has joined with Dr. Denis Waitley, author of "The Psychology of Winning" and "The Winner's Edge," to develop a "Double-Win" program, which is a seminar that teaches six critical steps to getting another job quickly.