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Employees leaving your company become (often vocal) brand ambassadors. From both a personal and professional perspective, creating a thoughtful experience for these employees can entail providing the same treatment when they walk out the door as when they were recruited in. Career and financial counseling and other meaningful benefits can send a powerful message—both to employees leaving and those who remain—that you care about your people.
We’ve helped serve as an extension of our corporate partners’ HR teams through a variety of separation strategies—including voluntary early retirement, voluntary separations, layoffs and events with systemic impacts. In this article, we’ll share a number of strategies we’ve seen companies deploy to help achieve their goals through these events.
Learn more about how Goldman Sachs Ayco can help companies, HR teams and employees during corporate events.
When companies are planning a voluntary separation or retirement offer, often one of their first steps is determining what populations will be impacted. For retirement offers, employers often determine the eligible group by analyzing the key demographic and plan design factors that impact an employee’s ability to accept an early retirement offer. For separation offers, factors such as division and job function may be used to create the eligible group. Regardless of the type of offer being extended to employees, companies should be sure to comply with applicable non-discrimination laws.
Some strategies we’ve seen our corporate partners implement include:
Some benefit incentives we’ve seen companies offer include:
Separation pay, or severance, in voluntary or retirement separations is typically handled differently than in involuntary/layoff situations. If it’s included, in our experience across Corporate America, severance is commonly provided as a one-time, lump-sum payment.
Some examples of separation pay provided by our corporate partners include:
The cost of medical coverage may be a major financial consideration in retirement—and companies may look into providing enhancements to coverage as part of a severance package, including:
Some specific examples from our corporate partners are included below.
While active defined benefit pension plans are far less common today, two-thirds of our corporate partners still have an active or frozen benefit.1 In our experience, employees require clear pension estimates, illustrations, and/or a calculator to help them understand how a decision could impact their personal finances.
Some examples of pension plan enhancements for impacted employees are included below.
Some specific examples implemented by some of our corporate partners include the following additional pathways.
Other considerations for voluntary separation/retirement
As the predominant retirement saving mechanism in Corporate America, 401(k) balances can be an important factor in an individual’s retirement decision. Employees offered retirement or voluntary separation will need to consider if their vesting will be accelerated and the process for repaying any outstanding loans. We have seen companies offer the ability to continue repaying the loan directly to the recordkeeper or to allow a short period of time to repay it in full.
Non-qualified deferred compensation (NQDC) plans
Employee deferral elections will generally dictate how and when NQDC plans will be paid but general plan rules may impact an early retirement or separation event. It’s important for employees to understand if employment termination will accelerate their payout based on plan rules.
Long-term incentive plans
Treatment of unvested equity awards can be a factor in an employee’s decision to accept an early retirement offer. From our experience helping employees navigate these types of events, there are several questions to be considered:
Accrued and unused Paid Time Off (PTO)
Companies typically pay out accrued and unused PTO in a separate lump sum. Some companies have plan features that offer participants the ability to redirect a portion of this payment to their 401(k) or HSA.
Access to a career transition counselor
Although not as essential for retirement situations, we have started to see more of our corporate partners offering these services for both separation and retirement offers.
In our experience, designing a separation package is critical for a layoff/reduction in force—but just as with a voluntary separation/retirement, companies should approach the process with compassion and understanding for impacted employees.
Some strategies we’ve observed in our work across Corporate America include:
Some benefits offered include:
For employees impacted by these events, our financial professionals often hear severance is the primary concern. In our experience, some of the considerations HR leaders weigh include:
Severance payments may muddy the waters around an impacted employee’s eligibility for unemployment benefits. In most states, workers are not eligible while still receiving severance payments—in others, they may be eligible if they receive a lump-sum severance. Companies may assist employees by clearly communicating—and helping them understand—the rules of their state.
Aside from severance, medical coverage is a top concern our financial professionals hear from an employee when they lose their job (both for themselves and their family). Many companies provide a period of continued medical coverage or employer-subsidized COBRA coverage, either for a fixed period, based on years of service or based on the number of weeks/months severance payments are received.
Some examples we’ve seen at our corporate partners include:
Pension treatment can also be confusing for employees to understand during an event. From our experience helping employees with their financial concerns, it’s important for companies to provide clear information on how and when an employee will be able to access their benefit in the future. For instance, unless a plan offers a lump sum payment option (or is allowing for a one-time lump sum election), employees generally won’t have immediate access to their pension balance if they aren’t retirement eligible. If a lump sum is available, employees should know their options for keeping their benefit in the plan or rolling the benefit to another eligible qualified plan or account.
When it comes to unvested 401(k) plan balances, we’ve seen companies accelerate the vesting of company matching contributions in layoff/reduction in force situations. On paying back a 401(k) loan, in general we have seen companies consider the same strategies discussed in this article around participants impacted by voluntary separation/retirement.
Career transition counseling services
These services can be an important resource to ease the stress of the transition and assist employees in finding new employment opportunities. Over three-quarters of our corporate partners who have gone through an involuntary reduction in workforce over the last 3 years have offered these services. They can include personal career coaching, skills assessment, resume building, help navigating a job search, interview preparation, networking, and even psychological counseling. We have seen our corporate partners offer at least 6-12 months of access to a career transition counselor from providers such as LHH, Right Management or Challenger, Gray & Christmas.2
Other considerations for an involuntary separation include:
Employee Assistance Program (EAP)
Layoffs can cause a great deal of stress and anxiety. Clear communications around access to an EAP can be a valuable resource, especially if impacted employees can continue to leverage these benefits. Some of our corporate partners choose to continue paying for a period ranging from 6-18 months. Employees can also elect to pay for access to an EAP after separation through COBRA.
For PTO, non-qualified deferred compensation and retirement plans, and long-term incentive plan awards, the considerations shared in this article around voluntary separation/retirement approaches also apply to layoffs/reductions in force.
All employees are impacted by a corporate event—especially those who remain. Employees can be asked to shoulder extra responsibility while maintaining—or exceeding—company goals within an environment of uncertainty and reduced trust and confidence. These employees may need special care to ensure they feel cared for and remain motivated. Some approaches we’ve seen corporate partners deploy include:
Interested in learning more about how we can help HR teams and employees? Contact us.
1 Based on 385 of GS Ayco Corporate Partners as of Jan 2023
2 Third-party providers referenced do not have a formal relationship with Goldman Sachs Ayco. The services they offer have not been independently vetted and their inclusion does not constitute an endorsement or recommendation. Providers are referenced for informational purposes only, based on observations of providers used by Goldman Sachs Ayco corporate partners
Examples provided for illustrative use only. Program designs and outcomes may vary based on organization. Read more disclosures related to this article.
Your legal team can provide guidance on how the strategies discussed in the article may apply at your company.
Updated for tax year 2022