PwC Layoff – Paying The Pesky Employees To Go Away

[When you see] the FAQs they distributed, you immediately notice the part with regard to Severance Packages. In fact, the Severance offer that was in the original FAQ for Wave 1 (and was promised throughout all 3 waves) was majorly, severely changed by Wave 2.

Every once and a while I get a call from a friend or family member who has been terminated who wants to know what they should do about it. It’s a very common phenomenon amongst all kinds of professionals anymore, ostensibly both for some type of performance reason (either the company’s lack of performance or the employee’s,) or for no reason whatsover than can be discerned readily.

In most cases, it’s too late to do anything except move on. In many cases, the employee has been presented with some kind of “package” that most often includes a waiver of rights to sue. They want to know if the amount and terms offered are “fair” or if they should get a lawyer and “sue the bastards.”

I am an independent consultant and writer for many reasons, not the least of which is I never want to work again for someone that is not of my choosing. I work now under my terms and with a level of detachment and independence that is not possible under most employer-employee relationships. I would also never work for anyone else again without an employment contract. Even at the highest levels, (short of officer-level in a public company) this is not as common as you might imagine. In the US, except for those covered by a collective bargaining agreement, (union workers) most employees are employed “at will”.

An employee is employed “at the will” of the employer for as little or as long as the private employer wishes, and in whatever lawful capacity the employer requires. The employee may choose to work at the employee’s will for the length of time he or she desires. An employer need not provide any reason for terminating an “at will” employee, so long as the termination isn’t unlawful or discriminatory (based on age, sex, national origin, disability).
Reasons for terminating an at-will employee may include, but aren’t limited to:
-Workforce reduction
-Change in company direction and business focus
-Poor company performance

In spite of this seemingly cold, detached relationship, various companies, sometimes voluntarily and sometimes per state law, have established severance policies to compensate employees who are terminated for reasons other than the most egregious ones such as unlawful behavior.

(However,) the ECI data indicate that severance coverage in the United States was incomplete in 2001. Only one-quarter (26 percent) of the full-time workforce was covered by a formal severance plan in 2001, with large differentials by occupation, work hours status, firm size, and industrial sector. Occupationally, 42 percent of professionals and administrators were covered, but only 29 percent of clerical and sales workers, and 16 percent of blue-collar and service workers.

There is considerable evidence, historical and current, that severance coverage (in the US) is primarily motivated by employer desires to limit the morale impact on the remaining work force of negative job actions…

Severance is a common concept everywhere but the US. Elaborate processes that insure that employees are treated fairly when terminations and lay offs occur are taken for granted outside of the US. Just look at Jerome Kerviel of SocGen fame. Have they fired him yet?

The Bureau of Labor Statistics provides this definition of severance pay:

“Monetary allowance paid by employers to displaced employees, generally upon permanent termination of employment with no chance of recall, but often upon indefinite layoff with recall rights intact. Plans usually graduate payments by length of service” BLS (1998, p.61). Although these payments may be distributed as a lump sum or as a series of periodic payments or “continuation of pay,” they are distinguished by the fixed sum nature of the employer’s financial commitment.

From the July 18, 2007 FAQs

Has the approach to severance changed for Wave 2?
Yes. At the outset of the SSR process earlier this year, we made several Wave 1 decisions that we have since revisited, as we have had the opportunity to reflect on some of the unintended outcomes of the process. One area where we have applied the lessons learned from Wave 1 regards our severance practices. Our approach to severance took into consideration both the needs of our business and the needs of our people, and we will continue to look at that balance. We designed our approach to severance to provide assistance to those individuals who were not matched to a role based on the reorganization and to support their search for a job outside of the Firm. The spirit of our policy was also to provide it in the manner of a Great Place to Work organization.

For Wave 2, we will continue to provide “enhanced” severance to those who are not offered a role as a result of the matching process. In addition, we will provide the enhanced severance to those who are matched but decline a role that has “significantly different” responsibilities, is in another location, or is at a lower grade level or has a lower level of compensation. (Decisions or questions as to what constitutes a “significantly different” role will be determined by the appropriate IFS functional leader and Gary Pell.)

As previously communicated, the enhanced severance package is calculated based on current level and years of service. It combines the “standard” severance benefit and is enhanced by a number of additional weeks of compensation based on overall years of service. The enhanced severance package also includes additional healthcare allowance related to COBRA benefits and outplacement assistance.

If I am not matched, what severance package can I expect to receive?
All employees that are not offered a position as a result of the matching process in their function’s Wave will receive an enhanced severance package. This enhanced severance package has been used previously by PwC and includes additional benefits beyond the standard package, such as a number of additional weeks of compensation based on overall years of service. The severance package also includes additional healthcare allowance related to COBRA benefits and outplacement assistance. Any individuals not matched to a role will receive a comprehensive package of information about their severance benefits.

What if I decide not to go through the talent assessment process or am matched but decline an offer?
Those individuals who opt not to go through the talent assessment and subsequent matching process, but who agree to stay on and continue to add value through the transition period, or who reject a comparable role at the same salary, level and in the same location, will be eligible to receive standard severance.

Those who choose to leave the Firm prior to the transition will be treated just as any other employee who resigns, and, consistent with our policy around resignation, will not be eligible to receive severance benefits.

7 replies
  1. Anonymous
    Anonymous says:

    I’m going to have to go ahead and disagree with you here.

    Public Accounting is full of underperformers. People operating at the far right of the bell curve, and even a few standard deviations away from it. They sucked in due to the large hiring volume and scrape by doing just enough work not to be noticed.

    Now, a firm has finally realized how stupid they have acted when they hired based on really no criteria at all. PwC has always had a bit of a “run and gun” mentality towards staff and engagements.

    So some stupid schmuck, who was able to wear the right color tie and woo the interviewing manager, is now going to walk away with a couple weeks pay and a few months off.

    Big woop. The majority are making out like bandits.

    Now, the manager who maybe didn’t have the same level of ulitization or other objective criteria yet was a devoted performer with a good relationship with the staff who is getting axed, that is a sad story. But really, how many “good” people are getting caught up in the firings? My bet is it is more of the first type…

    And if you were stupid enough to choose PwC in the first place, after hopefully looking into the company, maybe you deserve a “dear John” letter.

  2. Anonymous
    Anonymous says:

    I, for one, can attest to the number of ‘good people’ who were caught up in the firings. One of the things that interested me about the ‘reason’ behind the re-org was that it was supposed to enhance the level of service.

    I have remained in contact with people from the office I used to work in and I have learned that the level of service has dropped considerably. Employees who cared about their jobs and delivered service above and beyond have been replaced by lower paid employees whose only ambition is to make it through the day.

    There are a constant barrage of complaints, all falling on the deaf ears. Those left in the clutches of PwC are being fed news of the tremendous success the re-org has been… but they are not as ignorant as those spreading the news.

  3. Oversight for the Better
    Oversight for the Better says:

    I believe cost-cutting is the primary reason for all layoffs no matter how the employer terms it. And, labor is very expensive. Francine, you run your own business. Do you have any employees?

    I agree with anonymous that layoffs often reduce the service quality. And, they ultimately increase turnover, because the remaining employees are over-taxed, get burned out, and leave.

    Employment is a two-way street. Employers can terminate at will and employees can leave at will. I never hear of employers suing employees for quitting. As things are now, the power is on the side of employers. However, suppose health insurance was universal and reasonably priced without having to go through an employer. I bet people would willingly leave employ at a much greater rate. Competition for employees might go to a much higher level and more people might be able to get a contract from the employer.

  4. Anonymous
    Anonymous says:

    I agree PwC is quite horrible and once you realize that you receive inadequate training and development and that that leadership is horrible as well as their growth strategies you should leave. May of these people will be glad this happened.

  5. Zubin C.
    Zubin C. says:

    Was laid of from the Systems & Processing Assurance practice and have to say the people running PwC are a bunch of morons. They give you all this cr** about performance, and I have been rated above than expected every time, and they laid me off. The hired more people than they needed and cut out people who had experience because their salaries are high. But in the end of it they are left with newbies and lost out on tallent. I predict pwc will runs itself into the ground.

  6. Anonymous
    Anonymous says:

    Let there be no mistake. The truth is on both sides. Layoffs due to underperforming and layoffs due to cost-cutting. One thing I have not seen mentioned is the culture. The culture of relationships, networking and all who you know.

    I got hired by K**G as the SOX work was beginning to decrease. The company I believe planned there to be more audit hours than actuall realized. In other words, certain audit clients would be assigned to IT managers for the IT part of the audit. After AS5, everything went down hill quickly. In the interim, I was told “build your internal network, build your internal network”. The problem? These things take time. When hours are dwindling, there is a close the fraternity mentality – you aren’t let in. Senior managers will not let the newbie participate on engagements, proposals, etc. They go with the person that started with them out of college and has steadily progressed with them. The end result? I am forced to sign a letter 30 days prior to my “separation” that performance is inadequate due to utilization and business development. When challenged, not one performance evaluation indicates BAD performance. However, 30 days letter, the separation? Bitter? Yes. Happy to move on? Yes. However, I have to say that when I compared myself to those being held out as outstanding performers: equal utilization at the end, no business development for them, no more knowledge for them. The difference? Who they knew. That’s a fact.

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