In the Greek myth of Sisyphus, the former king is doomed to spend all eternity pushing a rock up a hill only to have it roll back to the bottom each time he gets it to the top. The human resources world currently appears to be living an existence much like that of Sisyphus. Over the past five or so years, most human resources departments have been focused largely on recruiting employees, and few would argue that there has been a plethora of suitable (or any) candidates to choose from. Recruitment was like Sisyphus’ rock being shoved up the hill. It is a thankless task for which recruiters generally received nothing but grief.
It appears that the profession has pushed the rock to the top, because in the last few weeks or months, human resources personnel from nearly every major industry in Calgary have woken up one morning to find the rock rolling wildly back down the hill. Companies are dismissing and laying off employees with increasing frequency and in increasing numbers, and all of the other problems that come along with a poor economy are making sudden and dramatic appearances.
When employers needed more people, human resources departments and leaders turned their attention to recruitment. Now, when employers have decided that they need fewer employees, the human resources world has no choice but to focus on layoffs, dismissals and other "right-sizing" exercises.
One of the changing realities brought about by the "new economy" relates to terminations and severances. Employees that were dismissed a year or so ago were released into a world in which there were a number of other opportunities available. Often, terminated employees could walk out one door with a severance cheque in hand, and almost immediately walk through the door of their new employer. The effect was that the severance payment was not needed to tide the employee over until he or she found the next position. The money was a bonus that could be invested or used to pay down debt.
In such circumstances, an employer could knowingly or unknowingly be less generous with severance proposals than perhaps the law of reasonable notice would dictate. Employees were likely to accept such payments without fuss knowing they were going to be able to work elsewhere as soon as they wished.
This is no longer the case. In the current economy, employees receiving severances are almost certainly going to be of the view that finding new employment will take time and that the severance proposal is needed to cover the costs of surviving that interim period. As a result, dismissed employees are almost certainly going to consider a severance proposal much more critically than they would have a year ago. They are more likely to get legal advice, and they are more likely to push back if the figure is not considered to be sufficient. Indeed, even reasonable and generous severances may generate demands for more from particularly aggressive former employees (or from former employees with particularly aggressive legal counsel).
Employers, therefore, need to review their methodology (if any) of setting severance amounts. If severance offers are too low, an employer is much more likely to find itself facing demands for greater severances, and a disproportionate number of wrongful dismissal suits. Furthermore, if an employer develops a practice of starting with "lowball" severance packages and then negotiating up, that employer will develop a reputation for being willing to raise severances when pushed. The result of having that reputation is, of course, increased pushback from dismissed employees - even if the employer subsequently changes its practice in setting severance amounts.
Now is the time for employers to review their methods for setting severances in order to ensure that they are making offers that are in the reasonable range. There are a number of methods for determining how much severance should be offered to an employee. Some employers use a formula to determine this, others have legal counsel review each proposed dismissal to determine the severance in the basis of the law of reasonable notice, and some rely on employment agreements that establish severance entitlements based on the agreement of the employer and the employee. Whatever method is used, employers should be sure that they are confident that the method is effective. If unsure, employers should have such policies or practices reviewed critically before utilizing them.