The following factors* should be taken into consideration when designing severance packages for terminated executives:
NATURE OF THE DISMISSAL
LEVEL IN THE ORGANIZATION
FINANCIAL POSITION OF THE COMPANY
PENSION OR OTHER COMPENSATION
* Influencing severance settlements and court decisions involving severance suits.
Companies should try to obtain a signed agreement from a terminated executive making no further claims on the company before he leaves the premises. The company will tend not to get this agreement unless it offers what seems at the time to be a reasonable severance arrangement, taking into account the seven factors.
An effective way to get such an agreement is to provide a relocation assistance program as part of the severance package. If the terminated executive prefers to consult with his lawyer prior to signing, the inclusion of relocation assistance in the package will tend to diminish his chance of winning a severance suit in court if he decides to sue, and therefore will increase the probability that his legal counsel will advise him to sign the agreement and forget about suing.