Monday, December 9, 2019

Severance Packages for Employer

Question: What is the reason for using severance packages for employer/employee separation. Answer: Introduction Regardless of the reason for separation, it is the responsibility of human resource department to end employment. As Chhaochharia Kumar and Niessen-Ruenzi (2012) stated that, if employee/employer relation ends up in a wrong manner then an employee can say adverse things about the company to the potential customers. In this assignment, the role of severance packages in post-employment procedures has been analyzed. The parameters of employment packages that constitute a need for severance agreement have also been analyzed in this assignment. Evaluation the reason for using severance packages for employer/employee separation As Bieling (2012) stated that employee turnover always becomes expensive for an organization. Poor management can increase the turnover rate of a company. According to US Bureau of statistics, the turnover rate of employees enhances the cost of business by 33% (Cadman, Carter Lynch, 2012). As Fiss Kennedy and Davis (2012) stated that, there 12 major reasons for which an ethical or skilled employees leave an organization. They are such as the rude behavior of employers, work-life imbalance, misalignment of employees, lack of feedback and coaching, lack of decision making capability and lack of opportunity for growth and promotion. On the other hand, there are some critical conditions have been found for which an employer has to terminate an employee. One of the primary reasons is inadequate job performance. Sometimes employers have to terminate employees as they are not able to meet the necessary aspects of a job. As Larkin Pierce and Gino (2012) stated that, sometimes hostile business condition forces employers to terminate employment relations. Unacceptable behavior of employees such as revealing company secrets to outsiders, sexual harassment, verbal or physical threatening and excessive absenteeism are the leading causes of employment termination. In order to retain a good relationship with all employees, it is a good business decision to provide all employees with severance packages, regardless of the reason for employer/employee separation. Wal-Mart is an organization that endorses post-employment obligations. This agreement of Wal-Mart is known as Post-termination agreement (Martin Scarpetta, 2012). According to this agreement, a transition payment is given to ex-employees during the termination period. However, transition payments will not be given to employees if they violate any Wal-Mart policy. According to the US Equal Employment Opportunity Commissions (EEOC), there are various types of severance packages that need to be given to employees. They are such as unused leave credits, health and life insurance, health and accident benefits, pension credits and supplemental unemployment benefits (Bieling, 2012). As Larkin Pierce and Gino (2012) stated that, no federal law can force an employer to provide employee severance packages. It depends on upon the agreement between employees and employers. There are some factors on which the severance package depends. They are such as: Length of employees tenure with the employers Causes for which employment relationship ends such as misconduct of employees, company downsizing Financial condition of employers (bankruptcy or economic growth) It has been found that there are mainly two types of severance packages given by organizations. One is unconditional severance packages, where the company provides some advantages to ex-employees regardless of the reason for employee termination (Martin Scarpetta, 2012). Another severance package is given by companies depending on the relationship with employees. The advantage of unconditional severance package is that it can increase the reputation of the company in the mind of employees. However, it can raise the cost of the company unnecessarily. As Larkin Pierce and Gino (2012) stated that, in conditional severance package is that, it helps to increase employee commitment towards the enterprise so that they become eligible to receive severance packages. The major flaw is that, if an ex-employee does not receive a severance package, then he can say wrong things about the company to the potential customers. Determination of the ability of severance packages to safeguard an organizations competitive advantage and sustainability Voluntary severance packages are offered by organizations at the time that can provide benefit to the company by reducing the workforce and the cost of benefits and salaries. As Larkin Pierce and Gino (2012) stated that, severance packages are like "Golden handshake," where employee and employers both get benefitted. It helps the company to recruit new and talented employees with low wages instead of giving high salary to old and inefficient employees. It will help the company to retain its sustainability in the market by strengthening its workforce (Bieling, 2012). Severance package provides executives a sustainable package upon termination. Severance package includes different types of agreement between employers and employees, which make employees financially shackled that can motivate them to stay with companies for longer period (Larkin, Pierce Gino, 2012). It reduces the turnover rate of an organization and provides a competitive advantage in the market. Conclusion After analyzing different type of severance packages, it has been found that companies provide financial incentives to employees depending on the relationship between employer and employees. It helps to enhance the workforce of the organization by retaining and introducing skilled employees within the organization. Reference list Bieling, H. J. (2012). EU facing the crisis: social and employment policies in times of tight budgets.Transfer: European Review of Labour and Research,18(3), pp.255-271. Cadman, B., Carter, M. E., Lynch, L. J. (2012). Executive Compensation Restrictions: Do They Restrict Firms Willingness to Participate in TARP?.Journal of Business Finance Accounting,39(7à ¢Ã¢â€š ¬Ã‚ 8), pp.997-1027. Chhaochharia, V., Kumar, A., Niessen-Ruenzi, A. (2012). Local investors and corporate governance.Journal of Accounting and Economics,54(1), pp.42-67. Fiss, P. C., Kennedy, M. T., Davis, G. F. (2012). How golden parachutes unfolded: Diffusion and variation of a controversial practice.Organization Science,23(4), pp.1077-1099. Larkin, I., Pierce, L., Gino, F. (2012). The psychological costs of payà ¢Ã¢â€š ¬Ã‚ forà ¢Ã¢â€š ¬Ã‚ performance: Implications for the strategic compensation of employees.Strategic Management Journal,33(10), pp.1194-1214.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.