Employers Bracing for Layoffs, Putting Focus to Severance Programs

The 2027 U.S. Severance and Separation Benefits Benchmark Study from workforce solutions and talent advisory firm LHH points out a noteworthy shift in organizational restructuring, driven by widespread anticipation of economic changes and an evolving approach to executive versus frontline equity.

The affiliated data report, which was released Oct. 23, is based on a survey of 600 HR and business leaders at U.S. organizations with 500 or more employees. The core takeaways display:

A general bracing for workforce changes;
A tightening of financial severance packages;
An expansion of career transition assistance; and,
A shift in who controls these decisions.

(Editor’s note: WorldatWork will soon be releasing the results of its 2027 Severance Pay and Workforce Transitions Research. Check back to WorldatWork Today for data and insights from the study.)

Layoff Expectations and Policy Changes

Sixty-nine percent of leaders polled by LHH are anticipating layoffs or reductions in force (RIFs) within the next 12 months. This forecast is particularly pronounced among high-level executives, with 80% of chief executive officers (CEOs) expecting cuts.

In response to changing economic landscapes, organizations are reining in the generosity of their standard payouts. In fact:

38% of organizations said they are making their severance policies less generous, a huge jump from just 9% in the 2024 study.
56% said they are making them more generous, a decline from 76% in the previous study.

Severance Pay Benchmarks by Employee Level

The LHH survey showed most American employers currently structure their pay based on employee tier, averaging between three to six weeks of base severance overall. However, policies vary dramatically based on whether the organization enforces specific maximum caps. Roughly 52% of employers set strict minimum payout boundaries, while 29% set fixed maximum caps.

The report detailed average severance minimums ranging from four weeks for nonexempt employees to six weeks for CEOs, alongside maximum caps that reach 24.2 weeks for CEOs and 7.5 weeks for nonexempt workers. Private and midsize companies notably set higher CEO maximum caps than public or large corporations.

Organizations also are changing the way in which they calculate severance:

40% now base it on a combination of age, length of service, job level and ability to find new work (up from 22% in 2024).
Only 1% give all of their employees the same flat number of weeks (down from 9%).

The Eligibility Gap Narrows

Executive and frontline severance eligibility has grown closer, with the gap dropping from 46 percentage points in 2024 to 19 points today, as CEO eligibility fell to 70% and non-exempt coverage rose to 51%.

Healthcare Continuation and Beyond-Cash Benefits

While cash severance is widespread (up to 96% in the finance and technology sectors), medical plan extensions through the full severance period are rare, offered by just 12% of employers. Instead, coverage typically stops at the end of the month (37%) or quarter (43%). Other common extended perks include:

Health insurance;
Life insurance;
Dental insurance; and,
Employee assistance programs (EAPs).

Outplacement and the Rise of Procurement

To mitigate impact to the employment brand, 79% of nonexempt and 85% of exempt workers now receive outplacement assistance. Furthermore, financial and procurement teams now direct 31% of outplacement purchasing decisions, surpassing HR departments (30%) and climbing from just 8% in 2024.

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics: