Because we don't have a social safety net in the United States, so getting laid off could make you instantly destitute.
> why do employers give it?
To maintain their community reputation. In the future when they hire again, it's easier to paper over a layoff if you can show that you tried to take care of the employees.
Also because it's the ethical thing to do.
> should one negotiate it?
Usually in a mass layoff like this you can't negotiate it, since it's a standard package and you don't really have any leverage. But if you're a one off "layoff" you can and probably should negotiate it. Your leverage is "I might sue you for wrongful termination". So the company has to make a calculus on what that might cost them.
> what is fair/unfair?
That's the 64,000 dollar question, isn't it? It seems like three months is pretty typical. When someone gets six months most people call them "lucky". When someone gets a year people call it "unheard of". No whether that's fair or not is anyone's guess.
It would be great to get some data on how long the average laid off tech worker is out of work. Maybe start a movement to get severance to match that. But again, the laid off employee has very little leverage.
> That's the 64,000 dollar question, isn't it? It seems like three months is pretty typical. When someone gets six months most people call them "lucky". When someone gets a year people call it "unheard of". No whether that's fair or not is anyone's guess.
That's an interesting take from the point of view of the USA. They address international DropBox employees in passing in the letter. For Mexico, by law companies have to pay 3 months severance when they decide to lay off an employee. Sometimes, when the person is fired for having bad performance the company can negotiate for less than that. In theory when an employee is fired for some cause attributable to him, the company doesn't have to pay the severance but the burden of proof is in the company, and it is very difficult to prove so.
That "at will" employment culture in the USA looks crazy ruthless for someone living with these protections.
As an American who has friends in sane countries, I feel the same way. But keep in mind we still have unemployment insurance in the US, where the government pays you for a few months after you lose your job (although it's capped pretty low). Also sometimes the way the USA does it makes sense too.
I was at a company that did a layoff once where they wanted to get rid of some underperformers in Europe, but Europe had such strong employment protections, the company was forced to get rid of good people in the USA instead to maintain cash flow.
After the layoff, I had coworkers in Europe who literally just stopped showing up, but had to be paid for six months anyway.
If the US had similar protections, the company would have just closed up shop and put 200 people out of work, instead of just a few.
Now if the US could just get a decent social safety net, then the way the US did things wouldn't be so bad.
Right, completely agree. We have the example of Orange telephone in France (previously France Telecom) : A company that needed to reduce workforce, but because of the strong labor laws (skewed in favour of the employee) the executives decided to make life miserable to employees to push them to quit... the result was tragically pushing them to suicide ( https://www.dw.com/en/france-orange-top-bosses-caused-employ... ).
I like the safety net option. It kind of decouples it from the goodwill of the company, and (I being kind of in favour of socialist practices) it will be easier to apply to the whole population.
what is a scenario where the employee would have leverage in a layoff? it’s hard to imagine except if something unethical/wrongful was going on leading up the layoff: sexual harassment, discrimination
Usually when you are a high level employee they want you to sign an anti-disparagement clause. For example the COO here. Even if Dropbox did nothing wrong, it could really hurt their business if she went around giving talks about how awful Dropbox is, or talking about internal politics to the press.
There is a good chance someone would even pay her for that information, so she has leverage by saying "you're going to cut off my future income, how much is that worth to you?".
Or a situation where there was some questionable behavior and there could be a lawsuit about wrongful termination. Usually the severance comes with a waiver where you waive your right to sue the company. So it's a negotiation of how much that waiver is worth to both you and the company. The higher up you are, the more likely there is room for negotiation there on the value of a possible lawsuit.
Maybe for a key hire with a specific skill-set. Principal engineer level probably can leverage severance since the hiring pipeline at that level is much slower
1. It was negotiated as part of your job offer. (It is too late to try to negotiate it at any other time.)
2. It provides a lever for future behavior. "By accepting this severance payment, you agree not to sue THE COMPANY for any reason, and not to disparage THE COMPANY, and ..."
3. It makes the employer look reasonable to current and future employees. "Laid off 11% of the workplace due to economic conditions; 3 months of severance and various benefits" is much more conducive to hiring than "Laid off 11% of the workforce with no notice, no severance, no nothing".
While severance benefits may help with company goodwill or assuage the feelings of the survivors, I believe the real reason is mostly number 2.
Exit aggreements almost always come with liability/discrimination disclaimers and usually new or updated language related to disclosures, company equipment, digital access, IP rights, non-compete language, and so on. Tying the exit agreement to new money provides the necessary consideration to establish a valid contract.
Having your income suddenly reduced to near zero is a significant financial shock to a lot of people. Rents/mortgages are due, etc. I suppose you can make it optional and have each employee negotiate but that will either end up with no one getting it, or a lot of people opting out and then surprised with the sudden drop. Kind of what happens with health insurance.
Because employers want you to sign a general release of claims, non-disparagement agreement, and/or other agreements when being sent off, and those aren't binding contracts without something in exchange.
And because, in many industries, to avoid hard feelings—if you aren't being let go for cause, especially if you have networks in a high-demand field, they want you giving positive or neutral referrals, not negative ones. And as things shift, they might even want you back.
And because the practice maintains the incentive for loyalty when company performance gives reason to expect imminent layoffs: if you don't give severance, the financial cost of quitting or being fired compared to being laid off is smaller.
