Perhaps your organization is moving to a new city to take advantage of lower costs. Or maybe there has been a merger and you need to consolidate forces. Whatever the reason, group moves present unique challenges for employee retention and productivity. This paper will explore how severance packages and stay bonus options can help to meet those challenges.
The first step is to take stock of the situation and understand the hand as dealt. For this paper, we will assume that the organization wishes employees to relocate or at least stay on and remain productive through a specific date.
Questions to ask yourself:
- Why is the company undertaking this group move? The motivation will help put parameters around policy benefits.
- What is the labor market in the origin location? A strong labor market will require greater incentives to get employees to relocate or stay on until the end.
- Get an understanding of cost-of-living differential between origin and destination for your workforce. Be sure to include the impact of income. property and sale tax.
- Dust of your existing severance payout policy.
Existing severance policy
The next step is to evaluate your employee population against the current severance policy. If all impacted employees were to accept a layoff at the target date, what is the total cost? What is the amount for each employee? It is important to remember that in a group move scenario, all employees will get either severance or relocation. Costs for both options should be understood, both in total and at an individual level.
Keeping the business running
Regardless of the perceived advantages of moving to the new location, some (many) employees will refuse relocation. Whether it be family roots, spousal employment, kids in school, or lifestyle, there are a myriad of reasons employees choose not to move.
The goal of the severance program should be to retain these employees through their final severance date to ensure productive, smooth operations during the transition period. If severance amounts are not sufficient to entice employees to stay, employers can sweeten the pot with an additional stay bonus amount. Such bonuses can be an additional factor of severance, a percentage of salary or even a flat amount. Depending on the organization’s philosophy on compensation equity, stay bonuses can be specifically targeted to high value groups or individuals. Outplacement services can also help with retention as they will help to address employee concerns of potential long-term unemployment.
The tricky part of a group move, is balancing severance and stay bonus amounts against the organization’s desire for retention and relocation of the current workforce. It can be counterproductive to offer high severance amounts and thus create an incentive for employees to refuse relocation.
While the existing severance policy is a starting point, consider changes to ensure individual payouts are not hurting relocation acceptance. For a team with significant seniority, a cap on total individual severance may be helpful. Employers may also wish to simply reduce the number of weeks per years of service. The key is to ensure employees make a good faith decision about relocation and if choosing not to relocate, stay through their final severance date to allow for a smooth operational transition. In some situations, employers may need to pay a relocation bonus equal to the severance amount to prevent severance from being an incentive not to move.
Once a group move announcement is planned, it is critical to have the details all worked out. Meetings should be held both in groups and individually to present details of important dates, relocation benefits, severance, stay bonus, and other benefits. Employees are only human, and the surest way to an unproductive workforce is to make a group move announcement but leave out the details. This is particularly true if the time frame between announcement and move is months or more. People crave certainty, especially in their job. Shown an uncertain future, many will quickly take a new job, particularly in strong labor markets.
Group moves are always challenging for any organization. Detailed planning and timely, specific communication are the keys to success.