3 Things You Should Consider When Managing Employee Severance
Benefit and payroll professionals "in the know" are considering alternative serverance plan approaches. Many call Supplemental Unemployment Benefit ("SUB-Pay") Plans, “the Better Reduction-in-Force Pay Plan.” Here’s why. SUB-Pay Plans let companies “supplement" state unemployment insurance with separation pay. When combined, the two provide the downsized or furloughed employee with up to 100% of their pre-layoff wage. How can this approach help you and your company? Here’s three ways you may not be aware of:
SUB-Pay Plans Save Companies Money
- Saves 7%-10% in severance costs from payroll tax savings because SUB-Pay is not considered wages for FICA, FUTA or SUI purposes;
- Save 35%-45% in severance costs when UC benefits is coordinated with separation pay;
- Reduces the impact of severance plan costs on the company’s cash flow;
- Can outsource the downsized employees’ support and assistance to a third-party administrator for the duration of their separation pay period.
SUB-Pay Plan Enhance Benefits to Displaced Employees
- Gain 5.65% in FICA tax savings;
- SUB-Pay Plans must be paid on a payroll schedule which provides the downsized employee with steady income during their reemployment transition;
- SUB-Pay Plan administration provides support and assistance to the downsized employee for the duration of their separation pay period.
Outsourcing SUB-Pay Plan Administration Saves You and Your Staff Time and Headaches
- Outsourcing SUB-Pay Plan administration reduces the stress and workload of a reduction-in-force on corporate HR and payroll staff;
- Provides displaced employees with call center support, Interactive Voice Response ("IVR") capabilities, and web support services to respond to their issues, and assistance to reduce their anxiety and stress during their reemployment transition.