Can't Afford a Severance Package? 5 Alternatives to Consider

One of the hardest parts about being a manager, HR leader or decision maker is having to let an employee go. Dismissals are never really personal -- usually you need to cut costs, are going in a different direction, or just need a better fit. While benefits like severance packages can sometimes ease a firing, what happens when you can't afford them?

Not being able to offer a severance package isn't unusual, especially in the U.S. Research indicates employees laid off in the U.S. are paid the least amount of severance no matter what their level of seniority or length of tenure with the company.

Those who actually did receive something earned as little as 2.76 weeks of severance per year of service, compared to an average 3.39 weeks per year of service for other countries. While this is typically due to budget restraints, your former employees still deserve some sort of payout, even if it's not monetary.

When you don't have the dollars for a severance package but still want to help your former workers to transition to new opportunities, check out these five alternatives:

Outplacement services

If your organization hasn't taken advantage of outplacement services, you may want to reconsider. Outplacement is a service specializing in assisting an individual's job search following a layoff or job loss.

Many outplacement solutions typically offer job search management tools, such as a hub to search, store and organize overall communications. Some even offer alumni assistance, which connects displaced workers to relevant alumni to help with their job search efforts. While these services are usually contracted by you, they may not cost as much as a large severance package and offer so much more than money alone.

Transfer options

If you have to let an employee go but don't want to say goodbye completely, why not offer transfer options? Transferring may mean going to a different department or an alternative location. Regardless, keeping a displaced worker "in the family" saves time and money since your company no longer has to recruit externally. Plus, if your worker has an abundance of transferrable skills, moving them from sales to marketing, advertising to PR, or IT to Web development keeps everyone happy -- especially your wallet.

Relocation assistance

Studies show 44 percent of workers say they'd relocate for the right job, but only five percent of U.S. companies offer relocation assistance. While providing relocation assistance isn't free, you may be able to offer stipends, housing information, or connections, which are just as valuable as a severance package. Apart from showing your commitment and appreciation to their professional futures, relocation assistance helps your former employees comfortably transition to new life. Sometimes, this is better than cash in hand.


Here's something that costs you absolutely nothing: a recommendation or referral. Cited as the No. 1 source of hire and retention year after year, referrals are not only free, but also they can really help a displaced worker find a new opportunity. On your end, dig through your contacts and evaluate who may be able to take on a new employee. Chances are, someone knows someone who's looking to hire. Your stamp of approval means an employer doesn't have to worry if a new hire will do their job. Your word -- and perhaps even your reputation -- does the work for you.

Extension of health benefits

If you supply health benefits to your current employees, fired workers may be extremely worried about them being taken away. Although they no longer work for you, extending health benefits over a set period provides a little piece of mind. Plus, it's not out of the question to extend health insurance for up to three months after a dismissal. This gives your former workers more than enough time to find a new opportunity or alternative benefits without having to worry about being uninsured.

If you can't afford severance packages, check out these five alternatives. Though assistance after a dismissal isn't a requirement, doing so helps you to maintain your reputation and preserve relationships.

What do you think? What are some other alternatives to a severance package?