Special Survey of Severance Practices

The Croner Company engages with our client organizations to provide timely insights on evolving compensation practices throughout the year. Our recent Survey of Severance Practices, conducted in February, reflects our ongoing commitment to capture current trends. This custom report focuses on the details of how companies are structuring severance programs today.

Severance Plans – Broad Eligibility with Targeted Exclusions
Most participating organizations extend severance benefits across all levels of regular employees, reinforcing the importance of consistent workforce policies. However, eligibility is often more limited for non-traditional roles: temporary employees are typically excluded, a majority of companies exclude project-based employees, and roughly half exclude unionized populations.

Severance Formula Design: Consistency vs. Differentiation
About half of companies offering a severance policy apply a single severance formula across all eligible employees. Among these organizations, the average minimum severance benefit is 4.6 weeks. A common structure provides approximately two weeks of pay per year of service up to 10 years, with a gradual reduction in accrual beyond that point.

Other organizations take a more differentiated approach, tailoring severance formulas by organizational level. In these cases, both minimums and maximums increase with seniority. On average, severance at one year of service ranges from approximately 4 to 7 weeks, while caps can range from about 30 to 53 weeks, depending on level.

Short-term and Long-term Incentive Treatment in Severance Packages
Inclusion of incentive compensation varies widely:

  • Short-term incentives (STI): Included by roughly half of companies
  • Long-term incentives (LTI): Less commonly included
  • Health benefit stipends: Also less prevalent

Among companies that include STI, the most common approach is to base payouts on target bonus levels, typically prorated for time worked. Alternative methods – such as using actual performance or most recent payouts – are less frequently used.

For LTI, prorated acceleration is the most common treatment, while full acceleration or no change in vesting occurs less often.

Clear Differentiation by Organizational Level
A consistent theme across survey participants is the increasing richness of severance packages at higher organizational levels. Executives are significantly more likely to receive short-term and long-term incentives, as well as health benefit stipends, with prevalence decreasing at lower levels of the organization.

Ongoing Insights from Croner
This survey is one of many ways Croner partners with participating companies to deliver actionable compensation insights. Through targeted studies and custom surveys, as well as through our annual industry-specific surveys, we help organizations stay informed, benchmark effectively and make confident decisions in a rapidly evolving compensation landscape.

The Croner Company’s surveys and consulting services are relied upon by organizations at all stages of growth to establish and modify pay practices and align compensation with mission, values and market.

Insights from The Croner Company’s Survey of Severance Practices