Mandatory severance pay from companies for laid off workers

[DifferentDrummr]

Investors in US stocks are hurting themselves by not supporting this. In Germany, there is already such a regulation, and in Japan, the requirement is 2 years.

The idea is simple: if a large or mid-size business needs to lay off employees due to business necessity, the company required to pay one years' salary in severance so that the employees are less likely to worry about financial pressures while they search for a new job. It also has the added benefit of keeping the overall consumer market much more stable. Finally, if it's not a layoff but a firing due to performance or conduct issues, the company has to produce some evidence to show that they aren't trying to dodge a layoff payment (information that the unemployment agencies already collect). This would effectively end the "at will" nonsense.

 

[TurtleDude]

Investors in US stocks are hurting themselves by not supporting this. In Germany, there is already such a regulation, and in Japan, the requirement is 2 years.

The idea is simple: if a large or mid-size business needs to lay off employees due to business necessity, the company required to pay one years' salary in severance so that the employees are less likely to worry about financial pressures while they search for a new job. It also has the added benefit of keeping the overall consumer market much more stable. Finally, if it's not a layoff but a firing due to performance or conduct issues, the company has to produce some evidence to show that they aren't trying to dodge a layoff payment (information that the unemployment agencies already collect). This would effectively end the "at will" nonsense.

What is the constitutional authority for such a law? And it might serve as an obstacle to a company hiring more people

 

[AliHajiSheik]

Investors in US stocks are hurting themselves by not supporting this. In Germany, there is already such a regulation, and in Japan, the requirement is 2 years.

The idea is simple: if a large or mid-size business needs to lay off employees due to business necessity, the company required to pay one years' salary in severance so that the employees are less likely to worry about financial pressures while they search for a new job. It also has the added benefit of keeping the overall consumer market much more stable. Finally, if it's not a layoff but a firing due to performance or conduct issues, the company has to produce some evidence to show that they aren't trying to dodge a layoff payment (information that the unemployment agencies already collect). This would effectively end the "at will" nonsense.

What if the employee gets a job in 1 month? Why only 1 year's severance?

 

[DifferentDrummr]

What is the constitutional authority for such a law?

Probably the same as the constitutional authority for the Securities Exchange Act. The SEC had radical new regulatory power for its day, all without a constitutional amendment.

And it might serve as an obstacle to a company hiring more people

Not if the company is well run.

Employees should be hired only if their work is going to add value to the company in the long term. Short-term, closed-ended projects need contractors and consultants instead.

 

[DifferentDrummr]

What if the employee gets a job in 1 month?

Easy. The company pays the first month directly to the employee being laid off and puts the rest into a bank account held in trust for the former employee. That account can pay out monthly and, if the trustee gets a new job before the money runs out, the balance goes back to the company. Sound fair?

Why only 1 year's severance?

Most people can get a comparable job within a year even if the market is soft. Those who say they've been looking longer are usually the ones who already have jobs and are just looking for a better one. Nobody can live on air for a year.

 

[AliHajiSheik]

Easy. The company pays the first month directly to the employee being laid off and puts the rest into a bank account held in trust for the former employee. That account can pay out monthly and, if the trustee gets a new job before the money runs out, the balance goes back to the company. Sound fair?


Most people can get a comparable job within a year even if the market is soft. Those who say they've been looking longer are usually the ones who already have jobs and are just looking for a better one. Nobody can live on air for a year.

Thank you for responding.

I'd like to understand better about who this bank account is managed by and at what fees, etc. What if the company goes under and there is no money to deposit?

Presumably a medium size business is already spending a lot of time, energy and money to stay afloat and now they have to reserve even more money for every employees salary they may need to sever. Wouldn't that make it more likely a company could go under?

 

[DifferentDrummr]

I'd like to understand better about who this bank account is managed by and at what fees, etc.

The structure would probably be similar to what state unemployment offices do. The state makes the deposits every month, and the accounts can be in pretty much any private bank.

What if the company goes under and there is no money to deposit?

Companies that go under are still responsible for taxes, even if they declare bankruptcy and regardless of whether they have any money.

One effect of a rule like this might be to create a "Layoff Insurance" industry. Companies pay premiums so that the payments can be made if they go under and can't meet them. .

Presumably a medium size business is already spending a lot of time, energy and money to stay afloat and now they have to reserve even more money for every employees salary they may need to sever. Wouldn't that make it more likely a company could go under?

Nobody said that business was easy. In any case, German and Japanese companies seem to be doing okay.

 

[TurtleDude]

Probably the same as the constitutional authority for the Securities Exchange Act. The SEC had radical new regulatory power for its day, all without a constitutional amendment.


Not if the company is well run.

Employees should be hired only if their work is going to add value to the company in the long term. Short-term, closed-ended projects need contractors and consultants instead.

That's a fairly good point

 

[DifferentDrummr]

That's a fairly good point

Thanks. I've been in the technology sector long enough to learn what constitutes good management versus stupid management.

 

[Bullseye]

Investors in US stocks are hurting themselves by not supporting this. In Germany, there is already such a regulation, and in Japan, the requirement is 2 years.

The idea is simple: if a large or mid-size business needs to lay off employees due to business necessity, the company required to pay one years' salary in severance so that the employees are less likely to worry about financial pressures while they search for a new job. It also has the added benefit of keeping the overall consumer market much more stable. Finally, if it's not a layoff but a firing due to performance or conduct issues, the company has to produce some evidence to show that they aren't trying to dodge a layoff payment (information that the unemployment agencies already collect). This would effectively end the "at will" nonsense.

Seems counterproductive to me. If a company has come to the point it needs to layoff employees why should they need to continue PAYING THEM? Isn't that the point of the layoff - to reduce costs? I'm not in favor of it.

 

[Bullseye]

What if the employee gets a job in 1 month? Why only 1 year's severance?

Good point - if he as a guaranteed salary for a year, why get another job? Does the salary from his previous employer cut off?

 

[DifferentDrummr]

Seems counterproductive to me. If a company has come to the point it needs to layoff employees why should they need to continue PAYING THEM? Isn't that the point of the layoff - to reduce costs? I'm not in favor of it.

It disincentivizes the company from becoming a revolving door.

 

[straykatz]

I think there should be some sort of incentive to curb the revolving door that many companies seem to have drifted towards - especially when getting rid of tenured employees to bring in lower salaried replacements or contract workers. I don't think paying 1 year serverance is the answer though. There once was company loyalty towards long standing/valued employees and valued employees were also loyal to those companies but that has become a thing of the past. We live in a disposable society where people have become disposable despite their hard work, talents, etc.

 

[99percenter]

I dont mind making the walmarts of the world pay for severance pay, but I don't think small mom and pop business should have that burdern.

 

[Bullseye]

It disincentivizes the company from becoming a revolving door.

As if that were a big problem. :roll:

 

[gdgyva]

Investors in US stocks are hurting themselves by not supporting this. In Germany, there is already such a regulation, and in Japan, the requirement is 2 years.

The idea is simple: if a large or mid-size business needs to lay off employees due to business necessity, the company required to pay one years' salary in severance so that the employees are less likely to worry about financial pressures while they search for a new job. It also has the added benefit of keeping the overall consumer market much more stable. Finally, if it's not a layoff but a firing due to performance or conduct issues, the company has to produce some evidence to show that they aren't trying to dodge a layoff payment (information that the unemployment agencies already collect). This would effectively end the "at will" nonsense.

First...this isnt Japan or Germany...this is America...if you want to live under their rules, move to their country

Second....Sure...as soon as employees have to pay companies one years wages when they take a higher paying job down the street from them....i mean, if i have to pay a years wages if i fire or lay off someone, they have to pay the same if they quit on me to go work elsewhere....fair is fair, right?

why dont you and your crazy friends try some of these crazy ideas in your OWN business....let us know how it goes....you know, pay them the LIVING WAGE, give them 6 months off for maternity leave, do whatever you want to do....it is your company....screw it up anyway you like

leave the rest of us alone....

 

[Helix]

Mandatory severance pay from companies for laid off workers

after living in a fire at will state that works hard to gut unions, i'll support this idea in order to discourage eliminating entire divisions at a whim in order to make a quarter look better.

 

[btthegreat]

It disincentivizes the company from becoming a revolving door.

The revolving door goes two ways. How should employees who quit, properly provide their former employer with security against the labor shortage they induce, when they leave?

 

[ocean515]

It disincentivizes the company from becoming a revolving door.

Well, it would certainly incentivize a company not to hire people, and either farm out work, use temporary workers paid by outside workforce companies, or invest in automation, if that option made sense.

 

[Barnacle]

Investors in US stocks are hurting themselves by not supporting this. In Germany, there is already such a regulation, and in Japan, the requirement is 2 years.

The idea is simple: if a large or mid-size business needs to lay off employees due to business necessity, the company required to pay one years' salary in severance so that the employees are less likely to worry about financial pressures while they search for a new job. It also has the added benefit of keeping the overall consumer market much more stable. Finally, if it's not a layoff but a firing due to performance or conduct issues, the company has to produce some evidence to show that they aren't trying to dodge a layoff payment (information that the unemployment agencies already collect). This would effectively end the "at will" nonsense.

Somehow I read it different ...

"Under the Employment Protection Act, an individual employee on permanent contract is entitled to severance pay if the employer indicates in the notice of dismissal that the dismissal is based on operational grounds and offers compensation or if the worker does not file a complaint against the dismissal within three weeks time.

In this case, severance payments of half a month’s wage for each year of the employment relationship can be filed. The maximum payment stipulated by law equals to 12 months' salary. This rises to 15 months' salary for employees aged 50 or older, with at least 15 years of continuous service, and to 18 months' salary for employees aged at least 55 and with at least 20 years of continuous service.

There is legal entitlement to severance pay for an employee in the case of a collective dismissal if a works council is in place. Under the Works Council Constitution, in case of collective dismissals due to operational grounds, the employer and the works council negotiate a social plan that includes redundancy compensation. ..."

Germany: Severance pay/redundancy compensation | Eurofound

 

[TurtleDude]

after living in a fire at will state that works hard to gut unions, i'll support this idea in order to discourage eliminating entire divisions at a whim in order to make a quarter look better.

that leads to a tough question and issue. is the purpose of a corporation to:

1) provide jobs and benefits to workers

2) make the owners a profit?

No one would rationally claim that say a company that uses lots of sheet metal, should buy from the same supplier after that supplier raises its prices and other suppliers, of the same quality and quantity of sheet metal, will sell it to the corporation for lower amounts.

 

[Helix]

that leads to a tough question and issue. is the purpose of a corporation to:

1) provide jobs and benefits to workers

2) make the owners a profit?

No one would rationally claim that say a company that uses lots of sheet metal, should buy from the same supplier after that supplier raises its prices and other suppliers, of the same quality and quantity of sheet metal, will sell it to the corporation for lower amounts.

i will vote against fire at will and "contractor" bull**** for the rest of my life.

 

[Bullseye]

i will vote against fire at will and "contractor" bull**** for the rest of my life.

There is a legal requirement that if a company is contemplating a large layoff (don't remember the exact requirements) they have to give a couple of month's notice.

 

[Helix]

There is a legal requirement that if a company is contemplating a large layoff (don't remember the exact requirements) they have to give a couple of month's notice.

not where i live. they have a meeting, they tell you that your division is ****ed, and that they'll do their best to "reallocate" you. it wasn't my division last time.

 

[Bullseye]

not where i live. they have a meeting, they tell you that your division is ****ed, and that they'll do their best to "reallocate" you. it wasn't my division last time.

How big was the layoff? The requirement is federal law.