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Do you have a guide for severance packages in nonprofits?

In answering this question, we find it useful to consider the corresponding question of, “what is the purpose of the severance package?” The amount of severance, the conditions of severance, and how it is presented to the individual and the public must be determined.

Below are the reasons and considerations for determining severance:

1. To reward length of service: The amount of severance is often tied to the length of service. While there is no standard rule of thumb, one approach this consultant is to offer a base severance of 2-4 weeks of salary, plus one additional week for every year of service. This could be quite costly, however, so be cautious when thinking about this as a possible guideline
2. To ease transition: One of the primary purposes of severance is to assist employees who are going to be immediately unemployed. Factors to consider include: What is reasonable to help them during a difficult transitonary time? How will this affect their unemployment benefits? How much unused vacation time or paid-time off (PTO) have they accrued?
3. To limit liability: Many organizations will provide a severance package in return for a signed waiver of liability. This waiver is a release of all claims upon the employer and has very specific legal requirements. It should only be used after consultation with legal counsel.
4. To provide pay in lieu of notice: Organizations may consider paying individuals rather than giving them notice to avoid uncomfortable situations created by the departed employee and/or of his or her colleagues, and as well as the fear of retaliation or sabotage.

When determining severance packages, keep the following in mind:

1. Do not discriminate: If you plan to give severance only to certain employees, be very careful about even the appearance of discrimination. If you are doing a reduction in force (RIF), be aware of disparate impact upon protected classes of employees.
2. Setting of precedence: If you craft a severance package, are you creating a precedent? Will this set an expectation that this will be a standard practice for the future?
3. Message you are sending: During organizational transitions, every action takes on enhanced significance. Be aware of the message that severance packages are sending to remaining employees, the public, the board, and funders.
4. Job closure, versus termination for cause, versus resignation: Do not confuse these. What are the conditions of providing severance, and not providing severance?
5. Personnel Policies and Legal Consultation: Always look to your policy manual and know that you will be held to your own standard. If you think there is may be legal exposure — which is common when bringing someone’s employment to a close — consult competent legal counsel.