Page 256 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

242 The Complete Guide to Executive Compensation

payments not eligible to receive while still on the payroll the day before leaving should not
exceed four times annual pay) An even better policy is to set a maximum (expressed as a
percentage of final year’s salary plus annual incentive) for each type of departure (e.g., change
of control, poor performance, or regular retirement).

Outplacement Assistance
As described in the previous section, severance pay is intended to cover the bridge of
unemployment linking former job and new employer. Outplacement assistance is the help
provided the employee in getting a new job. This includes preparing (or updating) a job
resume and circulating that resume to those who might be hiring. This is done first within
the company to eliminate the need for severance pay and permit the individual to continue
the company benefit plans. If this fails, an external search is undertaken. Assistance is also
provided in qualifying for unemployment compensation.
The former employer provides many terminated executives more deluxe assistance at
time of severance. The executive is counseled either by company consultants or outside
specialists on assessment of personal strengths and weaknesses, developing a plan of action
for getting a new job, preparation of a resume, and conducting an effective job interview. The
latter is often by videotaping and critiquing a mock interview. All this advice is directed
toward assisting the terminated executive to get a new job quickly. It also is directed at reducing
the anger, frustration, fear, and stress of being fired, or dehired, to use a euphemism. Since the
company pays the costs associated with such a plan and it can be structured to result in no
income to the executive, it is at least of moderate importance.
Unemployment Compensation

This statutory benefit is provided to those who were terminated but not those who left volun-
tarily. This combination state and federal benefit is administered by the state of employment.
Because of the low amounts provided, this has very low importance to the executive.
Summary of Time Off with Pay

Table 6-7 summarizes the probable importance to the executive of each of these forms
of time off with pay and their tax-effectiveness rating. Refer back to Table 6-3 for the
definitions. In the “importance to executive” section, “EB” (employee benefits) and “P”
(perquisites) are used when the all-employee and executive benefit coverages are different. A
checkmark (“ ”) is used when both groups are comparable. Four are probably of high impor-
tance (i.e., employment contracts, disability protection, severance pay, and vacations).

SERVICE PROGRAMS

Companies often provide a wide range of services to the employee or executive.
Assignment and Relocation Expenses (Moving Expenses)

The assignment policy reimburses a portion of the relocation expenses of newly hired employees
who must move in order to join the company. At lower levels, this may simply be the
cost of travel and moving the family possessions; at the executive level, this could include
guaranteeing a selling price and a loan for a new residence.