Life with "I"

Saturday, 18 April 2015

Employee Turnover

In a human resources context, turnover or labour turnover is the rate at which an employer gains and loses employees. Simple way to describe it are "how long employees tend to stay" or "the rate of traffic through the revolving door." Turnover is measured for individual companies and for their industry as a whole. If an employer is said to have a high turnover relative to its competitors, it means that employees of that company have a shorter average tenure than those of other companies in the same industry. High turnover may be harmful to a company's productivity if skilled workers are often leaving and the worker population contains a high percentage of novice workers.

Excessive turnover can be a very costly problem, one with a major impact on productivity. One firm had a turnover rate of more than 120% per year! It cost the company $1.5 million a year in lost productivity, increased training time, increased employee selection time, lost work efficiency, and other indirect costs.

But cost is not the only reason turnover is important. Lengthy training times, interrupted schedules, additional overtime, mistakes, and not having knowledgeable employees in place are some of the frustrations associated with excessive turnover. Turnover rates average about 16% per year for all companies, but 21% per year for computer companies.54 Computer companies average higher turnover because their employees have many opportunities to change jobs in a “hot” industry.

Many studies show that companies with low turnover rates are very employee oriented. Employee oriented organizations solicit input and involvement from all employees and maintain a true "open-door" policy. Employees are given opportunities for advancement and are not micro-managed. Employees believe they have a voice and are recognized for their contribution.

Facts [+]

There are three cost categories associated with employee turnover. Separation costs account for exit interviews, termination administration, severance pay, and unemployment compensation. Replacement costs account for attracting applicants, interviews, testing, and moving expenses. Vacancy costs account for increased overtime or temporary employee costs incurred while the position is unfilled.

Employee turnover costs can significantly affect the financial performance of an organization. On average, it costs a company about one-third of a new hire's annual salary to replace an employee. The cost to replace a minimum wage employee is about $3,700.

A vacated or unfilled job within an organization results in tangible, measurable costs as well as intangible costs. The intangible costs include the uncompensated increased workloads other employees assume during the vacancy, the added stress and tension during and after the turnover, declining employee morale, and decreased work group synergy.

TYPES OF TURNOVER

Turnover often is classified as voluntary or involuntary. The involuntary turnover occurs when an employee is fired. Voluntary turnover occurs

when an employee leaves by choice and can be caused by many factors. Causes include lack of challenge, better opportunity elsewhere, pay, supervision, geography, and pressure. Certainly, not all turnover is negative. Some workforce losses are quite desirable, especially if those workers who leave are lower-performing, less reliable individuals.

MEASURING TURNOVER

The turnover rate for an organization can be computed in different ways. The following formula from the U.S. Department of Labor is widely used. (Separation means leaving the organization.)

Number of employee separations during the month X 100

(Total number of employees at mid month)

For example, in a business with an average of 300 employees over the year, 21 of whom leave, labour turnover is 7%. This is derived from (21/300)*100.

Facts [+]

Employee turnover is calculated by dividing the number of annual terminations by the average number of employees in a given work force. The average employee turnover rate in the U.S. is about 12% to 15% annually. At the high end, fast food retailers experience up to 300% employee turnover. At the low end, advanced, market leading technology companies experience turnover of less than 8%.

Internal vs. external turnover

Like recruitment, turnover can be classified as 'internal' or 'external'. Internal turnover involves employees leaving their current positions and taking new positions within the same organization. Both positive (such as increased morale from the change of task and supervisor) and negative [such as project/relational disruption, or the Peter Principle (Peter Principle: Observation that in an hierarchy people tend to rise to "their level of incompetence." Thus, as people are promoted, they become progressively less-effective because good performance in one job does not guaranty similar performance in another. Named after the Canadian researcher Dr. Laurence J. Peter (1910-90) who popularized this observation in his 1969 book 'The Peter Principle.')] effects of internal turnover exist, and therefore, it may be equally important to monitor this form of turnover as it is to monitor its external counterpart. Internal turnover might be moderated and controlled by typical HR mechanisms, such as an internal recruitment policy or formal succession planning.

Employee turnover is caused by external and internal factors. External influences include local economic conditions and labor market conditions. Internal causes include such things as non-competitive compensation, high stress, poor working conditions, monotony, sub-par supervision, dysfunctional job fit, inadequate training, poor communications, and loose organization practices.

Reasons for Employee Turnover

Workforce managers, human resources professionals as well as industrial psychologists all have their own theories on the question of – “What are the reasons for employee turnover”.

Most executives cited the lack of challenges or opportunity for career growth, rather than inadequate compensation, as the main reason they left their last job, according to a recent survey by executive search firm Korn/Ferry International. Twenty percent cited ineffective leadership, while 17 percent said the attractive job market was why they left their last jobs.

Facts [+]

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The unintended costs associated with irregular schedules, night shifts and extended hours are eroding the profits of American businesses, according to a study by Circadian Technologies, Inc. The profit-eroding factors for businesses with shift operations include lower productivity, higher absenteeism,greater employee turnover, increased health care costs, and more job-related accidents.

Among the most common causes of employees leaving a company are:

Excessive workload, an employee doing the work of more than one person. This often entails overtime and necessitating the employee having to take work home. Many employees say that they become overwhelmed and overloaded with work. The increase in stress levels and pressure means that they cannot sustain it and will eventually seek employment elsewhere.
Management not giving the employee sufficient recognition for the work done, or taking the credit themselves of giving it to the wrong person.
Not giving the staff member sufficient power to make decisions to get the job done and to progress in the organization.
Ongoing change initiatives giving the employee a sense of instability.
Management not giving clear briefs and clear guidelines on their expectations of the employee.
Poor leadership skills

We’ve broken down the “Terrible Ten” employee turnover rate drivers to help you diagnose your business’ employee retention plan.

Poor leadership. Can you do much about this one? Absolutely. It’s far more prevalent than most imagine, and it has an astounding impact on employee turnover rates and costs.

Salary. 20% of workers cite this as their top employee retention consideration.

Employee benefits packages. Another 20% claim this as their most important employee retention consideration. Far more than salary, an effective employee benefits plan can generate an exceptionally high ROI as an employee retention strategy.

Lack of education opportunities. Employees’ top request was for professional education and enhancement programs. Another name for stagnant employees: job seekers!

Poor wellness offerings. If your staff doesn’t like your employee health and wellness programs, they are four times more likely to leave your company.

Toxic workplace environment. This is due in part to poor leadership, but interpersonal stress at the workplace contributes to absenteeism and low employee motivation, and ultimately, high employee turnover rates.

Lack of progression opportunity. If your employees see no hope for promotion, they will absolutely look elsewhere for employment. So if the idiot son-in-law is a permanent fixture in the corner office, beware!

Personal reasons. There’s not much you can do about this one. Just like the toymaker elf who wanted to be a dentist, if an employee’s life ambition takes them in a different direction, your best bet is to let them go.

Lack of FUN. The best jobs I’ve ever had have been fun. Not surprisingly, they’ve also been the jobs at which I’ve worked the hardest and produced the most. The same holds true for your employees. Do everything possible to add fun back into life at work.

Lack of life balance. Give your employees time away. Make sure they take it. And give them a vehicle to take high-end destination vacations at low cost. The mental and physical health benefits of wellness travel are staggering, and the impact on retention is powerful.

Facts [+]

There is no federal law that requires employers to provide vacation time, paid or unpaid, to its employers. Most employees consider it to be one of their most important benefits. Workplace experts agree that it is important to productivity and morale for employees to take time off in order to rest and rejuvenate. The typical U.S. worker receives ten vacation days per year.

Italy, France, and Germany top the list of average number of vacation days per year, according to the World Tourism Organization. Italians receive an average of forty-two vacation days per year. Korea, Japan, and the U.S. are at the bottom of the list. Americans receive an average of thirteen vacation days per year.

Many U.S. employers recognize 10 federal holidays, if not more.

Organizations commonly provide nine or ten days per year as public holidays, although there is no standard. Federal holidays, or legal public holidays, are recognized by Congress but are not observed by all employers.

Legal public holidays:

New Year's Day, January 1
Martin Luther King, Jr. Day, the third Monday in January
Washington's Birthday, the third Monday in February
Memorial Day, the last Monday in May
Independence Day, July 4
Labor Day, the first Monday in September
Columbus Day, the second Monday in October
Veterans Day, November 11
Thanksgiving Day, the fourth Thursday in November
Christmas Day, December 25

Minimizing Employee Turnover

Today's workforce seeks development, opportunity and job satisfaction. At one time, it was more common for workers to remain with one company for the duration of their career. Due to changing employee needs coupled with a competitive job market, employee turnover is on the rise.

The effects of turnover can be extremely costly. With departing employees comes the loss of intellectual capital, as well as costs associated with recruiting, hiring and training new personnel.

If your company is experiencing a pattern in employee turnover due to unsatisfied employees, there are steps you can take to improve retention rates, including:

1. Hiring employees with the right "fit". Compatibility is critical to retention. Behavioral based interviewing and competency screening goes a long way in determining personality, work style and potential match and success within your company.

2. Hiring older workers. Consider hiring candidates who are seeking stability. Older applicants may not be looking for the development opportunities that their younger counterparts may be in need of.

3. Describing the job correctly. Make sure you describe the job as accurately as possible so candidates will know what is expected. Misconceptions regarding the job responsibilities and work environment are one of the major causes of employee turnover.

4. Developing competitive compensation and benefit packages. Understand and research market pay ranges in your area and consider the value of benefits and employee perks; offering such extras to your workforce may be the key to your retention efforts.

5. Challenging your employees. Employees want to be challenged in the job they are performing to feel like they are growing both personally and professionally when challenged with attainable assignments.

6. Providing excellent supervision. Incompetent supervisors are often one of the first issues linked to employee turnover. No one wants to work for a manager who cannot adequately complete the tasks of his or her job, who is not passionate about the work being done and who fails to provide regular feedback. Providing better employee supervision as well as enhanced communication helps decrease employee turnover.

7. Recognizing employee success. It is important to let your employees know that their work does not go unnoticed. Employees are more willing to stay with a company if they feel a sense of pride and success in their work. When employees meet or succeed your expectations, show your appreciation for a job well done.

8. Providing an employee-friendly work environment. Be accommodating to your employees' outside demands. Providing employees with flexible schedules makes for a productive, satisfied workforce. The stress of balancing work and life diminishes when employees can work around their outside obligations.

9. Career Advancement Opportunities: Whenever possible, provide opportunities within the company for cross-training and career progression. Employees are seeking to develop themselves, and offering that opportunity to them may provide the satisfaction and stability they are seeking.

The bottom line is that it's extremely important to understand the impact of turnover in your business and determine the reasons why employees are leaving. The most effective way to do so is by conducting exit interviews with departing employees. This strategy alone will help you make adjustments that will reduce future turnover.

Facts [+]

The Domino's Pizza chain focused on its store managers to reduce worker turnover from a staggering 158% down to 107%, according to a StartupJournal.com article. To accomplish this, Domino's HR department deployed a store manager strategy of hiring more selectively, coaching them on how to create better workplaces, and motivating them with the promise of stock options and promotions.

Consumer products maker SC Johnson ranked number seven on Fortune Magazine's 100 Best Companies to Work For. The company has a devoted workforce as evidenced by its remarkably low turnover rate of two percent. Among SC Johnson's unique employee perks are: flexible work schedules, no meeting day Fridays, paid sabbaticals, and lifetime membership at the company fitness center.

Signs That Your Employee Turnover Is Too High

What is your organization's ability to retain the brightest, most experienced and dedicated staff! These are the people who keep everything running smoothly day after day.

Personnel gurus are projecting that when economy repairs itself, turnover rates in many organizations are likely to skyrocket. A study by PreVisor Corporation reported that 68% of companies are concerned about retaining employees during the economic recovery while 54% concerned about recruitment. Now is the time to plan before opportunities begin opening up.

Many employers are strategic about decisions effecting employee satisfaction levels. The models for these kind of organizations are Southwest Airlines, Wegman's Super Markets, Zappos, Joie de Vivre Hotels just to name a few. Other organizations see turnover as an inevitable part of the cost of doing business. Of course, some turnover is inevitable.

Some staff will leave to continue an education or follow a spouse. Others are offered life-changing opportunities that should not be turned down. Too often however, turnover decisions do not represent a move forward in the life of the employee. It means they were sick and tired of poor supervisors so they took a similar job for 10 cents more an hour. Managers and organizational leaders shrug their shoulders about these separations seeing the problem as financial. Rarely is money the real or only reason why people leave a job. Successful organizations manage turnover and they will always have a leg up on the competition.

Managing turnover is a solid strategic decision. It needs to be an ongoing priority. First, you need to objectively evaluate your scorecard. Here are thirteen characteristics of organizations with high turnover. If you decide that four or more are true for your organization then it is time to take action and to establish a retention plan.

You may have a turnover problem if you:

Spend too much money on overtime
Have significant recruitment advertising costs
Pay employees $10 an hour or less; they are prime turnover candidates
Have supervisors doing lower level worker tasks
Have Supervisors covering shifts during vacancies
Do not regularly analyze employee half-life, new employee first year retention, short term turnover and other turnover rate calculations
Do not regularly analyze the hard and soft costs of separation and replacement of employees.
Find yourself cutting back on program activities or organizational plans because you are short staffed
Use Temp Agencies to supply temporary or locum tenens workers
Have critical incidents resulting from staff mistakes that tie up manager's time in investigations
Have high daily absenteeism
Have employees who are present but not fully engaged in their work.
Feel like you are a training ground for your competitors

So, how are you doing? Is it time to plan for better staff retention? The benefits of lower turnover and higher retention are vast. Resolving any of these thirteen areas will save you money and create program efficiencies and quality you cannot presently imagine.

This kind of strategic planning takes time and a team. But it can be done. You may need to engage technical assistance.. Whatever you need to do, do it now because the rewards you will reap will far outstrip the cost of your investment.

It Costs How Much to Replace an Employee

Retaining your good employees

The Right People in the Right Places

Studies show that the average cost to replace a worker in the US is $17,000.00 (AVERAGE!!). Some HR managers use the rule of thumb that whatever the person's annual salary is - it will cost that much to replace them. One study evaluating the effects of the US Family Medical Leave Act found that "turnover costs for a manager average 150% of salary, including real costs of hiring... and intangible costs such as the new worker's inefficiency and lost productivity while the job is vacant."

Costs of lost productivity are as important as direct costs such as advertising or temporary staff. Total costs easily reach 150% of the annual compensation. The cost will be significantly higher (200% to 250%) for managerial and sales positions.

Bliss & Associates Inc., Wayne, NJ consulting firm.

There are three cost categories associated with employee turnover. Separation costs account for exit interviews, termination administration, severance pay, and unemployment compensation. Replacement costs account for attracting applicants, interviews, testing, and moving expenses. Vacancy costs account for increased overtime or temporary employee costs incurred while the position is unfilled.

Facts [+]
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Employee turnover costs can significantly affect the financial performance of an organization. On average, it costs a company about one-third of a new hire's annual salary to replace an employee. The cost to replace a minimum wage employee is about $3,700.

A vacated or unfilled job within an organization results in tangible, measurable costs as well as intangible costs. The intangible costs include the uncompensated increased workloads other employees assume during the vacancy, the added stress and tension during and after the turnover, declining employee morale, and decreased work group synergy.

If you think you can just hire temporary workers and avoid all those costs, think again. The cost of hiring and getting production from a temporary worker is nearly 40% of their salary, and temporary workers tend to have higher hourly rates than permanent ones - and higher turnover rates as well.
Let's put this in real terms. The lowest number seen anywhere says it will cost you at least 30% of an employee's total annual compensation to replace them. Assume you have 100 employees and your average salary is $10.00 per hour. At $10.00 per hour + benefits (at 20% of wages), your employees receive ~$12.00 hour in wages and benefits. Let's say that you have to replace 15% of your employees every year. Taking the most conservative estimate for employee turnover costs that I have been able to find (30% of their annual wages and benefits); each employee you have to replace is costing you $7,488.00.
100 employees X 15% X $7488 (including benefits) = $112,320 per year.
And that is using the most conservative cost percentage one can find. If we decide to use the national average ($17,000 / replaced employee) the cost goes to $255,000.00. By using the 'rule-of-thumb' (100% of their annual salary - $20,800.00/ replaced employee), the cost will go to $312,000.00... Staggering!

Why are the costs so high?

Why does it cost so much to replace a departing employee? Some costs, like paying off accrued vacation time or the cost of a help-wanted ad, are obvious.
Other costs include:

Increased unemployment insurance costs

Lost productivity while there is a vacancy

Time costs for the separation (Exit) interview (If your good employees are leaving, you NEED to know why)

Separation agreement costs (legal, financial, medical, retirement cash-out, etc.)

Overtime from other employees to handle the vacancy (which can lead to burn-out or absenteeism)

Time costs to review resumes

Time costs to interview candidates

Interview expenses for the candidates

Possible travel expenses

Possible relocation expenses

Head-hunter or signing bonus fees

Additional bookkeeping; payroll, 401k, etc.

Additional record keeping for government agencies

Reduced productivity while the new worker gets up to speed

Training programs

Corporate history lost

Morale can be affected

Intellectual property lost

There are also risks associated with loosing an employee.

Threat of lawsuit

Bad PR from disgruntled employee

Threat that the employee will take clients to a new firm

What can be done about it?

Job descriptions:
Put together a complete job description with tasks and duties outlined in a clear and concise way so that when someone answers your want ad, they know what they are applying for. Minimize that catch-all phrase "Other duties as assigned". This way, the employee knows what is expected of the position and the manager knows what to evaluate for performance reviews.

Pre & Post employment testing:
Job match/satisfaction can be measured by using the testing and evaluation systems that are available through RP2-Consulting. The cost of these evaluation and testing programs is significantly less than the cost of turnover in the first example above. We can test a candidate before they even show up for an interview and tell you if they have the right attitude, will show up for work when expected and won't take everything in the supply cabinet home with them. We can match new candidates to a given position. We have all heard of the 'Peter Principle' (Peter Principle: Observation that in an hierarchy people tend to rise to "their level of incompetence." Thus, as people are promoted, they become progressively less-effective because good performance in one job does not guaranty similar performance in another. Named after the Canadian researcher Dr. Laurence J. Peter (1910-90) who popularized this observation in his 1969 book 'The Peter Principle.'). We can look at your existing employees and match their skills and personalities with open positions in the organization. We can also help you identify the right people to put on teams. When teams are balanced (one person's strengths cover another person's weaknesses), results are significantly improved. Finally, managers (and CEO's) need to know their strengths and weaknesses, as those who work with them perceive them. Testing can show you what your true strengths and weaknesses are so that you can focus on improving those things that need to be improved.

Training:
Expecting someone to produce when they do not know how to produce, or what results are needed is absurd. Yet every day, people are hired to do jobs in which they have little or no formal training. Make sure that your employees get the training and guidance they need to meet your expectations. This will lead to better employee job satisfaction and reduced management stress. As a significant side benefit, well-trained employees are more likely to win appreciation for a job well done; and appreciation and recognition among your peers is a huge motivator. We can help you design your training programs to meet your individual needs.

Leadership:
The best plans and initiatives are all for naught if your leadership does not focus on what is working and where you want to go. Have you ever been backing out of your driveway focused on the trash-can you had to avoid hitting at all costs - it's right there in the mirror, just behind the vehicle, if you hit it your whole morning will be ruined - and like a laser, you run right into it...

We go where we focus. One key to your success is to focus on retaining your employees. Working to make them successful is far less expensive than replacing them. Treating them with respect and honor while making them feel like they have a stake in the company and its success will lead to your success. Focus on where you want to go not where you don't want to go. Looking at mistakes and finding fault is focusing on the past and the errors made there. Learn from mistakes and move on. Plan the future your organization wants. Focus on applauding success, both individually and for the team/company.

Employee Benefits Introduction

Cash is not enough today to recruit and retain top talent for your business. Providing an attractive benefits plan is just as important . Employee benefits are given to an employee in the form of incentives, providing insurance, over time payment or in non-financial form like giving training & development for employees to develop their career and most importantly providing flexible working hours to balance between work and life of employees.

Find out what your employees want

It's critical to recognize just how important a competitive benefits package can be in recruiting the best staff possible. Gone those days when salary in and of itself was lure enough.

In a recent survey, employees listed flexible work arrangements along with additional fixed pay and higher incentives as the top three preferred benefits.

"Competitive organizations (organisations which produce core products or services, and have international demand for those products or services. eg:software, telecom and automobile.), whether they are big or small, with benefits programs will not be able to attract employees —especially if you don't provide the most fundamental programs such as health care, disability insurance, and things like that. It's almost mandatory," says Lloyd Foight, a benefits consultant with the Ross Companies in New York.

These basic employee benefits, from employee health insurance benefits to retirement plans, are all worth consideration. If your business doesn't currently offer any compensation other than salary or hourly wages, you might find that your staff members are more loyal when you provide additional incentives

Mercer Human Resource Consulting, a subsidiary of Marsh and McLennan, is a global leader in HR and financial services. Mercer Human Resource Consulting provides expertise in human resource areas, ranging from compensation and benefits to operational effectiveness and employee performance and engagement. Mercer has over 15,000 employees serving clients in 41 countries.

Employee Benefit Advisor magazine provides in-depth articles for benefit advisers, brokers, consultants, worksite marketers and enrollment specialists. The publication provides need-to-know benefits information, market influences such as legal and regulatory changes, new benefit products, and better ways of delivering, marketing and selling benefits.

Facts:

Whoever says whatever, money/income is ultimate consideration for any employee who wants to shift or change organisation wherever it is located.

40% Indians are cautious about moving to West for jobs due to economic slowdown, which tells that money factor plays a key role in attracting and retaining employees in an organisation wherever it is located. Good salary combined with benefits such as extra allowances and perks are also playing a major role in bringing back professionals to India, according to 25% of the employers in the TimesJob.com study.

--Times of India,9-4-14

The two essentials for every plan

While you might be faced with a variety of requests, experts say that there are two essentials for every plan: medical coverage and a retirement plan. Other coverage such as dental, disability, and life insurance often are considered extras. ---Microsoft

Employee benefits and (especially in British English) benefits in kind (also called fringe benefits, perquisites, perqs or perks) are various non-wage compensations provided to employees in addition to their normal wages or salaries. Where an employee exchanges (cash) wages for some other form of benefit, this is generally referred to as a 'salary sacrifice' or 'salary exchange' arrangement. In most countries, most kinds of employee benefits are taxable to at least some degree.

Fringe Benefits

An employment benefit given in addition to one's wages or salary.The term "fringe benefits" was coined by the War Labor Board during World War II to describe the various indirect benefits which industry had devised to attract and retain labor when direct wage increases were prohibited.
Old age payments, Paid vacations,Survivor payments, Disability and health insurance Profit sharing, Pension plans, Bonuses, Life insurance, Education payments,Dental insurance, Worker's compensation, Accident insurance, Unemployment compensation,Discounts on goods/services purchased from the company and Child care.

Some of these benefits are: housing (employer-provided or employer-paid), group insurance (health, dental, life etc.), disability income protection, retirement benefits, daycare, tuition reimbursement, sick leave, vacation (paid and non-paid), social security, profit sharing, funding of education, and other specialized benefits (Transportation facility/ Company Car, telephone facility, Free electricity, or Petrol allowance).

Facts [+]
The Timberland Company, best known for its outdoor wear and hiking boots, regularly makes Fortune's annual list of best companies to work for. In addition to core benefits, Timberland offers its employees several unique benefits, such as $3,000 credit toward a hybrid car, 40 paid hours per year of volunteer work in the community, sabbaticals, and everyday casual dress.

Drugmaker Ely Lilly ranks as one of the best American companies to work for as compiled by CNN and Money magazine. Lilly helps its employees stay healthy with free health screens and an on-site clinic of physicians, psychologists, and nurses that handles 50,000 visits a year. Unique to Lilly is its perk to pregnant employees that provides a paid month off before their due date.

KEY EMPLOYEE BENEFITS IN COMPETITION ORGANISATIONS;

VACATIONSEmployee benefits includes vacations for employees for certain period of time during the employment. Jobs under present corporate environment are stressful which eventually effect the performance of the employee over a period of time. vacations makes employee re-energize and makes employee to forget about work stress what they had faced in the job. Because, vacations are often spent with their friends or family. Now a days companies are offering vacation packages to their key employees, good performers and those who be productive to company. Vacations for employees act as the motivating factor and also helps to retain employee for long period in the organization.

Facts [+]

Italy, France, and Germany top the list of average number of vacation days per year, according to the World Tourism Organization. Italians receive an average of forty-two vacation days per year. Korea, Japan, and the U.S. are at the bottom of the list. Americans receive an average of thirteen vacation days per year.

American workers receive on average about twelve vacation days a year. The typical American worker gives back an average of three vacation days, according to a recent survey by Expedia.com, leaving nearly 421 million vacation days unused. The survey estimates that 31 percent of employees do not take all their vacation days.

PAID TIME OFF
Employers know that their employees need a break once in a while. Employers are doing several things to address personal time off. Organizations are streamlining their vacation time, sick time, personal days, holidays, and volunteer time into a single "paid time off" category.That's why companies offer paid time off (PTO) in the form of vacation days, holidays, personal leave, and sick leave .Many companies have done away with "sick leave" and "vacation" as employee benefits and have replaced them with "paid time off" (PTO).

Paid time off is a bank of hours from which employees can draw. Employers credit additional hours to their employees "banks", usually every pay period. Most US employers offer their workers 10 paid holidays, 2 weeks vacation, two personal days, and 8 sick leave days per year. Under a PTO plan, the employees would be credited with 30 days paid time off instead (10+10+2+8).

The definition of paid time off is any time not worked by an employee for which the regular rate, a fixed or a prorated amount of pay, is accrued and paid to the employee.

As mentioned above, some employers prefer to give their employees a paid time off plan. This is a more flexible arrangement that gives the employee a set amount of days off to be used at the employee's discretion. These days can be used for sick time, personal days, vacations, or for whatever reason the employee may need time off. Like vacation and other forms of time off, the amount of days off generally accumulates through years of service and the level of the employee within the organization.

Facts [+]

Two of every three sick days used by U.S. workers were used for something other than illness, according to a survey by human resources information company CCH. The survey of more than 1.3 million workers found that family issues, personal needs, and stress were the rationale for taking more than half of all sick days. About 32% of sick days were actually used for personal illness

PERQUISITES
The term perqs (also perks) is often used colloquially to refer to those benefits of a more discretionary nature. Often, perks are given to employees who are doing notably well and/or have seniority. Common perks are take-home vehicles, hotel stays, free refreshments, leisure activities on work time (golf, etc.), stationery, allowances for lunch, and—when multiple choices exist—first choice of such things as job assignments and vacation scheduling.

Facts

Some unique perks put Worthington Industries in Fortune Magazine's 100 Best Places to Work list. Worthington offers its factory workers monthly profit sharing that augments monthly salaries by 40% to 100%. Worthington employees who join the company wellness program get their entire health insurance premiums covered. Also, employees are offered onsite haircuts for just $4.

Executive Perks
A recent report from Compdata Surveys reveals that cellular phones are the most popular executive perks.

The Executive Compensation 2008/2009 survey of 5,300 organizations found that 60.2% offered cellular phones to executives as a perk with 43.8% of employers providing laptops or home PCs in 2008. Fewer than a third of organizations in the survey provided car allowances or company cars to employees.The report analyzes both the national and regional data collected from 5,300 organizations across the United States with almost 25,000 incumbents. 45 executive and senior management positions were analyzed by base pay and total cash compensation.
The frequency of most executive perks on the revenue size of employing organizations but cellular phones were offered by over half of the companies surveyed, regardless of size. Company cars were also offered by 20% to 30% of surveyed organizations across the board. But businesses with revenues over $20 million were the most likely to provide executives with laptops or home PCs.
Perks mentioned in the survey included:

cell phones (60.2%)
car allowance (31.3%)
company car (26.4%)
supplemental life insurance (26.2%)
voluntary deferred compensation programs (18.8%)
annual physical exam (17.6%)
supplemental disability program (16.9%)
club membership(s) (15.7%)
supplemental executive retirement plans (10.3%)
supplemental medical insurance (6.2%)
legal counseling (5.6%)
post-retirement insurance (4.6%)
supplemental vacations (4.5%)
airline VIP lounge membership (3.1%)
dependent tuition reimbursement (3.3%)

The number of organizations offering each kind of executive perk has remained consistent over the past four years.

The purpose of the benefits is to increase the economic security of employees.
Employers who hope to retain solid, hard-working employees should be prepared to offer basic employee benefits. In addition to salary, good benefits provide important resources that not only help build a positive working relationship between employer and employee but also promote good work habits and financial practices.
Employee benefits will vary depending on the employer, and it is important for business owners to carefully consider their options. For example, the type of industry in which your business falls will help determine the types of basic employee benefits important to your staff. A job that requires employees to work outside in inclement weather, for example, might offer more paid sick leave than an indoor office position.
Employee Health Insurance Benefits
The most fundamental of all basic employee benefits is health insurance, which should be provided so that staff members can visit the doctor when they fall ill. Not only does this help the employee save money, but it also helps the employer by encouraging staff members to get treatment, thus allowing them to return to work more quickly and not spread illness to the rest of the staff.

INDIA

The Employees, State Insurance Act (ESI Act) was enacted with the object of introducing a scheme of health insurance for industrial workers. The scheme envisaged by it is one of compulsory State Insurance providing for certain benefits in the event of sickness, maternity and employment injury to workmen employed in or in connection with the work in factories other than seasonal factories.

Applicability

Under Section 2(12) The Act is applicable to the factories employing 10 or more persons irrespective of whether power is used in the process of manufacturing or not.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatre, road motor transport undertakings and newspaper establishment employing 20 or more persons.

Further, u/s 1(5) of the Act, the Scheme has been extended to Private Medical and Educational Institutions employing 20 or more persons in certain States .

The State Govt. has been requested to issue notification under Section 1(5) on the lines of Section 2(12) keeping the threshold limit for coverage as 10 employees instead of 20.

The existing wage-limit for coverage under the Act, is Rs.15,000/- per month

More Detailed >>

USA

Employee health insurance benefits should include health plans that allow employees to visit doctors in close physical proximity and assist with prescription purposes. There are several different options available to business owners, from PPOs to HMOs, so it is important to consider each option carefully.

Most Americans who have health insurance through their employer (and many who are self-insured) are enrolled in some type of a managed care plan - either an HMO or PPO. The most common types of managed care plans are health maintenance organizations (HMOs) and preferred provider organizations (PPOs).

Preferred Provider Organization. The PPO offers choice and flexibility, but is often more expensive. With a PPO, patients can see any doctor they wish, or visit any hospital they choose, usually within a preferred network of providers. One does not have to designate a primary care physician, and one can usually see any specialist without referral.

Health Maintenance Organization. HMO requires that patients see only doctors or hospitals on their list of providers, and in addition, patients must choose a primary care physician who will direct care and refer patients to approved specialists. This type of organization offers fewer choices and may make changing doctors or seeking second opinions more difficult. Generally, the HMO will not, without prior approval, cover medical expenses incurred by seeing someone who is not contracted with the HMO, but usually will have defined coverage for emergency medical care when patients travel outside the normal coverage area. The Health Maintenance Organization Act of 1973 required employers with 25 or more employees to offer federally certified HMO options if the employer offers traditional healthcare options.

Point-of-service (POS) plans. A third type of health plan -- known as a point-of-service (POS) plan – offers a combination of PPO health insurance and HMO insurance services. In fact, the "point of service" in the name reflects the fact that you make your choice of whether to use HMO or PPO services each time you see a provider.

Generally, a POS has rules similar to HMO insurance, but a POS will allow you to see an out-of-network physician for a higher fee. Some HMOs actually include a POS plan so you can see out-of-network physicians.

Facts [+]

According to the U.S. Department of Labor, nearly five million people who desire full-time jobs have settled for part-time work, up nearly 30% from five years earlier. Only 17% of part-time workers get health insurance benefits from employers, and only 21% of part-timers are included in employers' pension plans, according to the Economic Policy Institute.

PAID LEAVE
Similar to employee health insurance benefits, paid leave allows sick employees to stay home and recover without jeopardizing their paychecks. Paid leave, like paid vacation, can take many forms. For example, maternity and paternity leave, examples of paid sick leave, are given to new parents who need to stay home with newborn children. Paid leave can also apply to employees who come down with the common cold or flu.

In some cases, these basic employee benefits are called "personal days," which implies that they can be used for reasons other than injury or illness. Some employees simply need a mental health day to recuperate from the stress at work; personal days give them that option.

Retirement Plans
A retirement plan allows employees to prepare for their futures, securing their financial stability after they have aged out of the work force. Furthermore, it is easier for businesses to offer retirement benefits than most people think.

USA

A 401(k) plan is arguably the most popular of the basic employee benefits. It allows employees to contribute tax-deferred earnings to their retirement plans while the employer assists. Simple 401(k) options are available to small businesses with fewer than 100 employees.

Mandatory or Compulsory Benefits

Some small employers may wonder what employee benefits they're legally required to provide. Believe it or not, the only legally required benefit employers are obligated to maintain is workers' compensation insurance — or be self-insured.

Although most employee benefits are provided at the employer’s discretion, others are required by law. Legally required benefits include Social Security, unemployment compensation, and workers’ compensation.

A) SOCIAL SECURITY—Social Security for employees is a concept which over time has gained importance in the industrialized countries. Broadly, it can be defined as measures providing protection to working class against contingencies like retirement, resignation, retrenchment, maternity, old age, unemployment, death, disablement and other similar conditions..

Facts [+]

The long-term viability of the social security system is facing serious issues. People are living longer, baby boomers are nearing retirement, and the birth rate is low. The result is the worker-to-beneficiary ratio has fallen from 17 to 1 in 1950 to 3 to 1, and within 40 years 2-to-1. At this rate there will not be enough workers to pay scheduled social security benefits at current tax rate

Social Security for employees in India

With reference to India, the Constitution levies responsibility on the State to provide social security to citizens of the country.
The State, here, discharges duty as an agent of the society in order to help those who are in adverse situations or otherwise needs protection owing to above mentioned contingencies. Article 41, 42 and 43 of the Constitution do talk about the same. Also, the Concurrent List of the Constitution of India mentions issues like-

Social Security and insurance, employment and unemployment.

Welfare of Labour including conditions of work, provident funds, employers' liability, workmen's compensation,invalidity and old age pension and maternity benefits.

Below mentioned are the important employment laws on the Social Security benefits within India meant for the employees working in various industries and it is compulsory for employer to provide Social Security benefits to his employees according to this acts. If any contrivance with laws mentioned below by the employer shall be made liable for punishment by the Legislature.

State Insurance Act, 1948

provides for health care and cash benefits in cases of sickness, maternity and employment injury

health and medical care facilities are provided to the workers through a network of 140 hospitals, 43 annexes and 1443 dispensaries located throughout the country

Jointly administered by the Central Government and the State Governments

while the Central Govt formulates the Scheme, recovers the contribution from employers of covered establishments with the help of its Recovery Officers, builds the infrastructure (hospitals, dispensaries etc.), provides 7/8th of the total expenses, the State Government contributes 1/8th, posts Medical Officers, specialists and paramedical staff, procures and instals equipments, dispenses medicines and has the overall responsibility for the management of the hospitals/dispensaries

Director General (DG), ESIC is the Chief Executive Officer of the Corporation and functions under the overall Supervision and control of the Board and Committees/Councils formed thereunder More Detailed >>

Maternity Benefit Act, 1961

Regulates employment of women before and after child birth and provides for 12 weeks maternity leave, medical bonus and certain other benefits
the Act is not applicable to the employees covered under the ESI Act, 1948. >>

March - 2013: The Madras High Court held that the government employees opting for children through surrogacy would be entitled to maternity leave in the form of child care leave. Honourable High Court said that if law can provide childcare leave in case of adoptive parents, then it should also apply to parents who obtained child through surrogate agreement. The object of such a leave is to take care of the child and develop a good bond between the child and the parents.

Payment of Gratuity Act, 1972 >>

provides for payment of gratuity @ 15 days’ wages for every completed year of service or part thereof, in excess of seven months
maximum amount of gratuity payable under the Act was raised from Rs. 1.00 lakh to Rs. 3.50 lakh with effect from 24.9.97
no wage ceiling for coverage under the Act

Employees Provident Fund and Miscellaneous Provisions Act, 1952

In respect of establishments employing 20 or more persons and engaged in industry notified under Section 6 of Act. It is basically a social security provision and provides some financial stability post retirement to employees.The constitution of India provides that the state, within the limits of its economic capacity, must make effective provision for securing the right to work, education and to public assistance in cases of unemployment, old age, sickness and disablement.

It is these directive principles which led to the creation of the Provident Fund Act. The contribution limits are 12 per cent of basic salary plus dearness allowance, subject to a maximum limit of Rs 6,500 (Rs 780). If the employee’s emoluments exceed Rs. 6,500/- per month, he has the option to join the Scheme(s) with the consent of employer.

This is true for both employers and employees, though employees may contribute a higher amount voluntarily.

Though PF contributions are the internal activity of the Indian supplier company, many European and American customers treat internal statutory compliance as part of the vendor's assessment.

A blacklist on any item, therefore, means that the vendor becomes ineligible for the contract. While dealing with international vendors, this is perhaps one method adopted by clients from almost all developed nations to make sure that they don't unknowingly become a party to unhealthy business practices.

Pension benefit after retirement/superannuation (A superannuation pension shall be granted to a Government servant who is retired on his attaining the age of 60 years. )

The minimum eligibility period for receipt of pension is 10 years. A Central Government servant retiring in accordance with the Pension Rules is entitled to receive superannuation pension on completion of at least 10 years of qualifying service.

In the case of Family Pension the widow is eligible to receive pension on death of her spouse after completion of one year of continuous service or before even completion of one year if the Government servant had been examined by the appropriate Medical Authority and declared fit for Government service.

W.e.f 1.1.2006, Pension is calculated with reference to average emoluments namely, the average of the basic pay drawn during the last 10 months of the service or last basic pay drawn whichever is beneficial. Full pension with 10/20 years of qualifying service is 50% of the average emoluments or last basic pay drawn whichever is beneficial. Before 1.1.2006, for qualifying service of less than 33 years, amount of pension was proportionate to the actual qualifying service broken into completed half-year periods. For example, if total qualifying service is 30 years and 4 months (i.e. 61 half-year periods), pension will be calculated as under:-

Pension amount = R/2(X)61/66

where R represents average reckonable emoluments for last 10 months of qualifying service or the last pay drawn as opted by the govt servant.

Minimum pension presently is Rs. 3500 per month. Maximum limit on pension is 50% of the highest pay in the Government of India (presently Rs. 45,000) per month. Pension is payable up to and including the date of death.

Commutation of Pension
A Central Government servant has an option to commute a portion of pension, not exceeding 40% of it, into a lump sum payment with effect from 1.1.1996. No medical examination is required if the option is exercised within one year of retirement. If the option is exercised after expiry of one year, he/she will have to under go medical examination by the specified competent authority.

Facts [+]

In India, states like Andhra Pradesh government had removed the pension scheme for government employees those who had joined after 2004, November with the motive to cut down the state expenditure and retain revenues. Eventually lead to initiation of pension schemes by the different bankers and insurance companies like MetLife India Insurance Co. Pvt. Ltd., an Indian affiliate of the U.S.-based Metropolitan Life Insurance Company. some of pension scheme by different companies are Met Pension –Par , LIC Pension Plus, ICICI Pru Life Link Pension SP, SBI Life – LifeLong Pension,Bajaj Allianz Pension Guaranteed, HDFC Personal Pension Plan,TATA AIG Life Nirvana, Birla Sun Life Immediate Income Plan, Reliance Life Traditional Golden Year Plan. etc.
In fact private and public own companies are providing better incentives and benefits to their talented employees especially in the IT and Automobile sector to protect the morale of employees and retain them in organization for long period.

Facts [+]

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To go into the background of Provident Fund, it is basically a social security provision and provides some financial stability post retirement to employees. It isn't an idea specific to India, and may generally be found across the globe. The United States imposes Social Security and Medicare contributions towards old age, disability, pension and medical benefits. As early as the 1880s, Germany had built a social insurance programme (one requiring contributions from workers) that provided for sickness, maternity, and old-age benefits. Volatility of income especially hurt the older workers, as they often bore the brunt of economic downturns.
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India Present Prime Minister Manmohan Singh said at the 44th Indian Labour Conference, Women employed in part-time jobs may soon have a legislation to guarantee them benefits of regular jobs and also to bring more women in the work force, the government needs to make provision for part time work which would have the same characteristics of full- time employment.

The Health Insurance Portability and Accountability Act was enacted by U.S. Congress in 1996. HIPAA specifies national standards to protect individuals' medical records and other personal health information. HIPAA also regulates the security of health information, national standards for electronic healthcare transactions, and national identifiers for providers, health plans and employers.

B) SABBATICAL BENEFIT: [Sabbatical :any extended period of leave from one's customary work, especially for rest, to acquire new skills or training, etc.]

Coming soon: Up to 2 years' sabbatical for women bank staff

New Delhi, March 2012 : Come April, and women employees of public sector banks (PSBs) may be able to get sabbatical of up to two years during their career.

The Finance Ministry has asked PSBs to place this proposal before their respective boards for decision and its introduction with effect from April 1,2012, official sources said.

This follows the Government agreeing to the Khandelwal Committee's recommendation to introduce sabbatical for women employees of PSBs. The sabbatical benefit will be available only to employees who have put in a minimum of five years of service. The leave will have to be taken for a period of at least three months at a time and it should not be taken more than once in a year.

But, the Government's decision has somewhat irked trade unions, as they contend that such a move would be unilateral and in violation of the service conditions provided in the bilateral settlement between the Indian Banks' Association (IBA) and the unions.

The Khandelwal Committee was set up in October 2009 to study human resource issues in public sector banks. The Committee had made 105 recommendations, of which the Centre has given its green signal for 56.

United States

401(k) plan (Retirement Benefit)
Employer-sponsored employee benefit scheme supported by the US tax code. Under this plan, a limited amount of an employee's before-tax salary is deposited into tax-deferred retirement plan where it accumulate free of tax. Withdrawals by the employee before he or she reaches the age of 59½ years attract penalties except in certain cases of hardship.

A survey of recent retirees conducted by Putnam Investments found over 78 percent regretted not saving more during their work years. Fifty-nine percent felt they should have started saving for retirement earlier in their careers. More than a third wished their employer or plan manager had encouraged them to save more aggressively.

C) UNEMPLOYMENT COMPENSATION—In USA an individual laid off by an organization covered by the Social Security Act may receive unemployment compensation for up to 26 weeks. Although the federal government provides certain guidelines, unemployment compensation programs are administered by the states, and the benefits vary state by state.

Facts [+]

Feb 2012, WASHINGTON: The US House of Representatives passed a compromise bill on Friday extending a payroll tax cut and jobless benefits through 2012, measures aimed at boosting the US economy.The bill passed by a vote of 293 to 132 and nine abstentions, with broad support from Democrats and Republicans, after a bipartisan deal was reached to end a long and bitter fight over a key proposal by President Barack Obama. The cost of the package has been estimated at $150 billion.

The plan is expected to extend a cut in the Social Security tax rate -- from 6.2 to 4.2 per cent -- for another 10 months, and extend unemployment benefits through the end of the year. It will mean a salaried worker making $50,000 a year will be getting about $1,000 more in take-home pay over the course of the year.

Britain is facing a youth unemployment crisis with more than one in five 16 to 24 year olds currently without a job. The hospitality industry is a key employer of young people and around a quarter of InterContinental's 15,000 British employees are aged between 18 to 24.

D) WORKER'S COMPENSATION—Until the early part of the 20th century, workers had little recourse in the event that they were to become the victim of a workplace accident. But the new processes and machines that were incorporated into many jobs with the spread of industrialization created a sufficient increase in the level of occupational danger to warrant the attention of legislators. In response to the growing problem, laws were enacted to grant workers access to financial benefits that their employers would be obligated to provide, free of any considerations about liability. In some ways, it was a tremendous victory, and in others it was less so.Workers’ compensation benefits provide a degree of financial protection for employees who incur expenses resulting from job-related accidents or illnesses.

E) PAID VACATION
Employees who work all day, every day, without a break in sight, will generally be less productive on the job. Offering paid vacation as part of your benefits package will create a more positive work environment and will help your employees avoid burnout. According to Salary.com, there are several ways in which paid vacation can be structured.
For example, some employers offering basic employee benefits allow employees to "earn" paid vacation through years of service. It is also important to determine whether or not your employees will be allowed to carry over unused paid vacation days when a new year begins.

Facts [+]

Italy, France, and Germany top the list of average number of vacation days per year, according to the World Tourism Organization. Italians receive an average of forty-two vacation days per year. Korea, Japan, and the U.S. are at the bottom of the list. Americans receive an average of thirteen vacation days per year.
statutory holiday entitlements:

U.K. (28 days)
Poland (26 days)
Greece, Austria, France, Sweden, Luxemburg, Finland and Denmark (25 days)
Venezuela (24 days)
Brazil, Peru, Spain, Portugal, United Arab Emirates (22 days)
Norway (21 days)
Argentina, Italy, Belgium, Germany, Cyprus, Ireland, Switzerland, the Netherlands, Latvia, Russia, Slovenia, Serbia, Slovakia, Lithuania, Croatia, the Czech Republic, Romania, Japan, Australia and New Zealand (20 days)
South Korea (19 days)

It takes twenty-five years of service in the United States to achieve the mandated minimum vacation allotments in other comparable countries, according to an Economic Policy Institute study. France, Austria, and Denmark mandate at least 25 vacation days per year to employees. There is no mandated vacation time in the United States.

American workers receive on average about twelve vacation days a year. The typical American worker gives back an average of three vacation days, according to a recent survey by Expedia.com, leaving nearly 421 million vacation days unused. The survey estimates that 31 percent of employees do not take all their vacation days.

Every legal worker in the U.S. is entitled by federal law to three basic benefits. Workers' compensation provides insurance for work-related injuries or death. Social security provides retirement income and disability coverage for workers and their dependents. Unemployment insurance provides payments for a period of time presumably long enough to allow workers to find new jobs.

New Year's Day, January 1
Martin Luther King, Jr. Day, the third Monday in January
Washington's Birthday, the third Monday in February
Memorial Day, the last Monday in May
Independence Day, July 4
Labor Day, the first Monday in September
Columbus Day, the second Monday in October
Veterans Day, November 11
Thanksgiving Day, the fourth Thursday in November
Christmas Day, December 25

India
It consists of holidays which have to be observed compulsorily across India.These holidays are:

Republic Day,
Independence Day,
Mahatma Gandhi's Birthday,
Budha Purnima
Christmas Day
Dussehra (Vijay Dashmi) An additional day for Dussehra

Holi
Janamashtami (Vaishanvi)
Ram Navami
Maha Shivratri
Ganesh Chaturthi / Vinayak Chaturthi
Makar Sankrantili
Rath Yatra
Onam
Sri Panchami / Basanta Panchami
Vishu / Vaisakhi / Vaisakhadi / Bhag Bihu / Mashadi Ugadi / Chaitra Sakladi / Cheti Chand / Gudi Pada 1st Navratra / Nauraj

Diwali (Deepavali)
Good Friday
Guru Nanak's Birthday
Eid ul-Fitr
Eid al-Adha (Bakrid)
Muharram
Prophet Mohammad's Birthday (Id-e-Milad)
Dussehra (Maha Navami)
Dussehra (Vijay Dashami)
Deepawali
Eid al-Adha (Bakrid)
Guru Nanak's birthday/Kartik Poornima
Dr. B R. Ambedkar's Nirwan Diwas
Moharram
Christmas

E) NIGHT-SHIFT ALLOWANCE

According to the labour law, mandates the employer to pay double wage to the worker who works beyond the prescribed working hours or for extra working hours. In addition to the payment of double wage for extra working hours, Night-shift allowance is paid to the workers who does job at night-shift or who does job beyond the prescribed day working hours. Under this allowance, employee will pay some amount for the purpose of transportation/commuting from his residence to workplace.

In fact, especially in the software companies, many employees who are working at night-shifts are complaining about non-payment of night-shift allowance, but it has mentioned as paid in their salary payslip.

Severance Pay

severance pay is the compensation or benefit paid in the form of money by employer at the time of resignation on mutual agreement, retirement, laid off or employee leaving the company on any reason expect on dismissal by misconduct.Typically, severance pay amounts to a week or two of pay for every year that the employee was with the company. Executives may receive a month's pay for each year of service and senior executives generally receive severance pay as outlined in the employment contract. In addition to pay, severance packages can include extended benefits, such as health insurance and outplacement assistance to help the employee secure a new position.

Severance pay amounts may have peaked in 1999 when employers were giving laid off workers an average of twenty-four weeks of pay, according to a study by finance publisher Kiplinger. The study observed that the decline was a result of employees changing jobs more frequently than in previous years, since severance pay is based on the length of employment.

The Severance package may include the following:

The employees remaining regular pay

An additional payment based on months of service

Payment for unused vacation or sick leave

A payment in lieu of a required notice period

Medical, dental or life insurance - Some employers offer a continuation of insurance benefits but they would not foot the paying of the bills

Retirement benefits

Stock options

Unemployment benefits - Fired employees can claim unemployment benefits if they were fired for reasons other than serious misconduct.

A severance package's worth varies from company to company, as well as from employee to employee. Employers may consider the following circumstances when determining how much severance to offer:

Pay level/salary received prior to termination
Duration of employment
Position at company
Performance
And other pertinent factors

It is important to remember that although you may feel like you deserve severance, employers are not required to provide one in the event of a layoff.

Facts [+]

May 2012 Google Inc acquired (buyout) Motorola Mobility for $12.5 billion, following this in August 2012 Google Inc cut 4000 jobs in the United States due to drop in its profits due to drop in sales and announced severance package costs about $275 million for the retrenched employees . Google stated that his decision was taken to minimise its costs and make business profitable in future.

Eligibility for Severance Pay
To be eligible for severance pay, an employee must be serving under a qualifying appointment, have a regularly scheduled tour of duty, have completed at least 12 months of continuous service, and be removed from Federal service by involuntary separation for reasons other than inefficiency (i.e., unacceptable performance or conduct).

Computation of Severance Pay Fund

An employee's severance pay fund may consist of two parts-the basic severance pay allowance and an age adjustment allowance, if applicable.
Basic severance pay allowance

The basic severance pay allowance consists of-
One week of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service through 10 years;
Two weeks of pay at the rate of basic pay for the position held by the employee at the time of separation for each full year of creditable service beyond 10 years; and
Twenty-five percent of the otherwise applicable amount for each full 3 months of creditable service beyond the final full year.

Age Adjustment Allowance
The basic severance pay allowance is augmented by an age adjustment allowance consisting of 2.5 percent of the basic severance pay allowance for each full 3 months of age over 40 years.

Thus, any severance pay you may have received in the past is taken into account when applying the limit. Severance payments will be equal to your weekly pay at the time of separation and will be paid out at regular pay period intervals (usually biweekly) until the severance pay is exhausted. The only deductions made from severance pay are taxes, social security (if applicable), and Medicare.

Facts [+]

Potential new-hires are increasingly negotiating severance packages and outplacement assistance as a condition for accepting job offers, according to a USA Today article. Executives are likely to negotiate these employment terms but the practice is spreading down through the ranks. Career experts agree that this form of negotiation was once considered bad form but is now generally accepted.

"There is no law which compel to pay severance pay"

There is no legal requirement in the U.S.A to provide severance pay to terminated employees. Many employers routinely give severance packages to employees in order to bridge the gap between one job and the next and to hedge themselves against lawsuits. On average, severance-paying organizations provide terminated employees between one and two weeks pay for each year of service.

Employers are not legally required to give severance pay to fired employees. However, they may do so only under two circumstances:

o Some states require employers to give a small severance pay when they close down a facility or laying off a large number of employees

o An employer is legally required to give severance pay if workers are led to believe they would be paid when they leave employment. This is evidenced by:

A written contract stating the severance would be paid
A promise that employees will receive severance pay
A history of the company giving severance pay to other employees in the same position
An oral promise to the employees that severance will be paid

Some employers routinely give severance packages to long-serving employees who were fired for reasons other than serious misconduct, as a way of softening the blows of being laid-off.

Employers with formal severance policies spend less on severance packages than those that do not, according to a study by Right Management Consultants Inc. Companies with informal policies tend to incur higher administrative and severance costs associated with the packages due to policy decisions that are made on a case-by-case basis, often resulting in more generous packages.

In INDIA there is a law which compel to pay gratuity to terminated employee.

Not in the name of severance pay, unlike United States and other countries, There are certain labour laws in India compel for payment of certain an amount for retrenched or terminated employee from the employment by his employer.

In India there is a law (Payment of Gratuity Act, 1972) for payment of an amount to an employee who is having minimum of five years of continuous service in concern organisation get terminated by his employer. According to section 4 of Payment of Gratuity Act, 1972, the gratuity is to be calculated at the rate of 15 days salary last drawn by an concerned employee who is having minimum five years of continuous service in concern organisation. For this purpose, in the case of Lalappa Lingappa v. Laxmi Vishnu Textile Mills (All India Reporter 1981 Supreme Court 852), it was held that the interrupted service by reason of sickness, leave, Lay-off, strike, lockout or cessation of work not due to any fault of employee should not be regarded as a break in continuity of service. Payment of gratuity is not applicable to employee who has been dismissed from the service for the reason of indiscipline or misconduct.

In the case of Babu Ram V. Phoenix Mills (1999 (1) labour law Journal 2 58), the court held that there was a service of petitioner has been terminated by dismissal, it cannot be said that he was in continuous service from the date of employment will the date of superannuation.

In INDIA there is a law which compel to pay retrenchment compensation to retrenched employee.

In India there is a law ( Industrial Dispute Act, 1947 ) compels for payment of retrenchment compensation to retrenched employees .according to section 25F(b). The retrenchment compensation shall be 15 days of last drawn salary multiplied with number of years of service completed by an employee in the concerned organisation.Honorable Supreme Court of India held that retrenchment compensation is intended to give relief for sudden and unexpected elimination of employment.

The compensation to the employee has been eliminated retrenched but not dismissed, such employee he's having the right to claim an amount in the form of compensation or gratuity under above mentioned labour laws. This sort of compensation or gratuity may be treated as Severance Pay in India. In fact, many of the employees or not aware of these labour laws which gives them the right to claim an amount for the retrenchment or termination but not dismissal due to misconduct or indiscipline.

Severance Package as Goodwill to Employees

Many companies offer severance package as a sign of goodwill to former employees. A good severance package says a great deal about the humanity of a business manager. It may be designed in such a way that the size and the financial capacity of a business company are also considered. The severance package need not be elaborate; it just has to be an honest gesture on the part of the employer.
Having a good severance package to offer a departing employee creates a lasting impression of understanding and goodwill.
A severance agreement is a contract, or legal agreement, between an employer and an employee that specifies the terms of an employment termination, such as a layoff. Sometimes this agreement is called a "separation" or "termination" agreement or "separation agreement general release and covenant not to sue." Like any contract, a severance agreement must be supported by "consideration." Consideration is something of value to which a person is not already entitled that is given in exchange for an agreement to do, or refrain from doing, something.

Severance contracts often stipulate that the employee will not sue the employer for wrongful dismissal or attempt to collect on unemployment benefits, and that if the employee does so, then they must return the severance money.

Severance agreements are more than just a "thank you" payment from an employer. They could prevent an employee from working for a competitor and waive any right to possibly pursue a legal claim against the former employer. Also, an employee may be giving up the right to seek unemployment compensation. It is important to review a severance agreement carefully and contact an employment attorney to assist with the review.

If you were promised a certain amount of severance by your former employer and you have not seen that money or have only seen a portion of it, your employer has violated a contract and you can sue for that money and breech of contract.

While severance is not the same as an actual wage-as you did not actually work for that sum of money-the fact that you entered into a contract stating that a certain amount of severance pay would be granted is enough to justify a lawsuit.