Today, Fortune 1000 companies are seeking cost-effective alternatives to traditional severance plans. They are finding that a proven sixty year old concept, Supplemental Unemployment Benefit ("SUB-Pay") Plans, may provide the answers. A SUB-Pay Plan can relieve a company of both the cost and administrative burdens associated with severance plans, as well as help their former employees gain more net income and transition to new employment quicker than with a traditional severance plan.
In today’s economic environment, reductions-in-force are not only unavoidable, but necessary in order for companies to meet the demands of an ever-changing business and economic environment. And, while no company wants to lay off any employee, there comes a time when layoffs must happen.
In what could be viewed as an “entitlement benefit,” the majority of companies in the United States prefer to provide a lump-sum severance benefit to their reduced workforce in order to provide a “cushion” to new employment. Unfortunately, this type of severance, when coupled with the potential for the laid off employee to receive state unemployment insurance (UI) benefits simultaneously, may inadvertently encourage that former employee to stay out of work longer than is necessary.