The price of a pink slip

The price of a pink slip

Summary: It turns out, it costs less to sack a worker in the U.S. than it does almost anywhere else in the world. Suddenly, relocating Bolivia or Venezuela--places where workers cannot be fired at all--doesn't sound so bad.

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The U.S. makes giving you the boot an easy choice.
This is a difficult time to be a worker. If you're in the financial sector or in one that is affected by it--in short, just about everyone with a job--you're likely feeling a squeeze brought on by the housing market collapse and the ensuing stock market loss of $160 trillion.

And sadly, when it is time for companies to figure out where to cut expenses, headcount is one of the first places they look. Shaving 10 percent of a workforce can save millions a year in payroll expenses, typically without losing 10 percent profit.

However, a sidebar in The Economist this week highlights exactly how much of a U.S. phenomenon the idea of slashing jobs to save money actually is. It turns out, it costs less to sack a worker in the U.S. than it does almost anywhere else in the world, as there are no penalties or compensation repay required to fire a full-time employee of even 20 years in the U.S.

In Germany, that same company would have to continue paying the worker the equivalent of 90 weeks pay, as would China. India requires about 55 weeks pay to lay off a 20-year full-time company veteran, and Britain about 23 weeks. After the U.S. (tied with New Zealand and Tonga in having no mandatory penalties), the country with the smallest fiscal punishment for firing a long-time employee is Japan, and even there the worker would receive an additional four week's pay.

Of course, this doesn't mean that laying off a U.S. worker, even a short-term one, can't be costly. Businesses often refer to the "cost of turnover," and what they mean is that the time they spend training another employee to do the same job, not to mention incurring legal fees, should a worker feel they were wrongly terminated. Nonetheless, the laws are in their favor, not yours, which likely has many-a-workers at least considering relocated lives in Venezuela or Bolivia, countries where workers cannot be fired at all.

Topics: IT Employment, New Zealand, China, India

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41 comments
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  • double-edged sword

    This is a double-edged sword. Employers are going to be much more reluctant to hire someone if they know they will have to continue paying them after they fire them. And what's the incentive for a laid-off worker to look for a new job if their old employer is obligated to pay them?
    lumpy_blumpkin
    • Consideration

      [i]Employers are going to be much more reluctant to
      hire someone if they know they will have to continue
      paying them after they fire them.[/i]

      It's way too slanted in the favor of employers who are
      not even required to give advance notice of layoffs. It would be nice for companies to have to give some
      period of advance warning, maybe 30 days, before
      laying off people. The worse thing that would happen
      to them is that some people may leave before their
      projects are done or before they train their
      replacements.

      [i]And what's the incentive for a laid-off worker to
      look for a new job if their old employer is obligated
      to pay them?[/i]

      So this is a reason not to look for a new job...not
      for everybody. What does incentive to look for a job
      have to do with whether employers should do more for
      employees they lay off?
      Taz_z
      • Advanced notice is dangerous

        for your business. Layoffs generally create disgruntled, unhappy workers, who will do your company more damage (directly or indirectly) than the cost of severence pay. Most companies I know of have a policy that the laid off worker is walked to the door right after notice.
        DigitalFrog
        • And that is why...

          ...I plant my viruses within a few days of my job start date. If I don't "check in" every 7 days, the virus is set to execute.

          Companies need to learn that people are not disposable chaff, to be laid off at a moment's notice, so that the overpaid CEO can get a new yacht. There must be repercussions.
          proudgeek
          • Sorry,

            I've woorked in Union shops where firing someone was a very difficult process. All it did is fill the shop with useless people, pile on extra work for the people who DID work, and make the company less competitive.

            When you hire on, you agree to do the work you're paid for, if you don't do the work you should be fired.

            Agree companies should use common sense, shouldn't be able to get rid of someone to make room for the managers brother-in-law or similar reasons. They should be required to have a legitimate reason.

            Ken.
            merc2dogs`
          • Union workers

            The point of the article is that companies can easily save costs by reducing its work force. Because the most a laid off non-union worker is entitled to is state unemployment. Elsewhere you have to pay him while he finds or even is trained for a new job.

            The article has nothing to do with union workers that are hard to fire. Actually union workers aren't hard to fire for goofing off, the employer simply has to put out the effort.
            shanedr
          • You'd look a bit silly....

            You'd look a bit silly if you went in to hospital for a week, and came out to find your virus had eaten the network, been discovered, resolved and you were facing criminal charges.

            This sort of behaviour cannot be condoned - while in the US you have much less protection than we do in the UK, there are is still legal recourse or union support if you have been badly treated - 'vigilante' actions are almost always a bad idea.
            jelder@...
        • Of course it is

          Right now, most companies do nothing for workers they
          are about to lay off. As a matter of fact, many of
          them lie about it and deny they are going to do it.
          That's a change that could be made considering there
          is not a chance of requiring severance for laid off
          people.
          Taz_z
      • Re: Consideration

        It is not slanted in the favor of employers. There is no
        requirement that employees give any advance warning to
        their employers before they quit; why would employers be
        required to do so? Of course, it is the common practice in
        a professional setting that 2 weeks notice be given in
        either case.

        The bigger point is, it's preposterous for a company to be
        required to continue paying an employee who has been
        laid off. Healthy, well-run companies do not just go
        around willy-nilly laying off good employees because, as it
        has been pointed out by others, it is expensive to recruit
        and train new employees. People are generally laid off
        either because the company is not doing well or because
        they are not doing well. In either case, forcing the
        company to pay them for months after they have been laid
        off makes no sense.
        lumpy_blumpkin
        • On the other hand...

          A company, on a Friday, lays off a worker. No notice, have a nice day, go to hell.

          You mean to tell me said worker just stops getting paid? Just like that? With NO parachute to help them get back to work? Job searches are expensive endeavours; suits, dry cleaning, gas for the interview, second and third interviews, etc. Unemployment is usually insufficient to support a family and facilitate a job search, and now you're saying they shouldn't even have that (considering companies pay unemployment insurance)?

          If a company can afford to massively cut their work force, they can afford the costs that come from that. Plain and simple. If they're not willing to take that hit, they shouldn't have hired the extra people in the first place.
          superbus
        • You are wrong

          [i]It is not slanted in the favor of employers.[/i]
          Yes it is. They call all of the shots.

          [i] There is no requirement that employees give any
          advance warning to their employers before they
          quit[/i]
          If you read my post, you will see that I think this
          should be a requirement. I know that it is not a
          requirement now.

          [i]why would employers be required to do so[/i]
          To give people a chance to get on with their lives.

          [i]it is the common practice in a professional setting
          that 2 weeks notice be given in either case[/i]
          Actually, the employee is expected to do that. In my
          area, none of the big employers do this for employees.

          [i]The bigger point is, it's preposterous for a
          company to be required to continue paying an employee
          who has been laid off.[/i]
          I never made this claim. Did you even read my post?

          [i]Healthy, well-run companies do not just go around
          willy-nilly laying off good employees[/i]
          True, but dysfunctional ones do and they are
          statistically significant. Look at any American car
          manufacturer, or in my area, Sprint and Yellow/Yellow
          Roadway/YCRW. However, people at these companies are
          not waiting for the hammer to drop as they are
          constantly looking over their shoulders.

          [i]because, as it has been pointed out by others, it
          is expensive to recruit and train new employees[/i]
          Dysfunctional companies don't care. They lay off en
          masse and hire the same way when times are good.

          [i]People are generally laid off either because the
          company is not doing well or because they are not
          doing well.[/i]
          No argument here except for the second part. I've
          seen some very good performance appraisals and resumes
          from these laid off people.

          [i]In either case, forcing the company to pay them for
          months after they have been laid off makes no
          sense.[/i]
          Read my post...I never recommended this.

          You sure sound like a heartless, ball-less
          [i]executive[/i] whose father is the CEO. I'm sure
          your employees only work for you because they can't
          find anything better yet. You obviously didn't read
          my post, and you probably don't ever listen to your
          employees (or customers).
          Taz_z
      • There's worse...

        [b]It's way too slanted in the favor of employers who are not even required to give advance notice of layoffs. It would be nice for companies to have to give some period of advance warning, maybe 30 days, before laying off people. The worse thing that would happen to them is that some people may leave before their projects are done or before they train their replacements. [/b]

        I can see this being a fiasco of epic proportions. You're an employee at company X. Your boss calls you in one day and tells you they're giving you 30 days notice. You're going to be laid off one month from today.

        Where's your incentive to work? For that matter, where's your incentive to do anything to help the cause of your company?

        No... After being given such a notice, you've become a liability to the company. Giving you a month on the job can give you opportunity to pull an awful lot of monkey business. Theft of company data. Raiding the office supplies. Let's not forget sabotage. Reworking code you've written so it goes POOF the day after you leave, wiping out crucial data files, etc...

        There's method to the madness as to why it's done the way it is currently.
        Wolfie2K3
    • Hmmm... Incentives..?

      [b]And what's the incentive for a laid-off worker to look for a new job if their old employer is obligated to pay them? [/b]

      Gee.. Usually things like the threat of hunger, being evicted and living on the streets is generally a pretty good incentive to get off one's duff and find employment.

      And let's not forget that an employer is already obligated, to a degree, to pay for laid off workers - it's paid in the form of those unemployment benefits you get when they do give you the axe.
      Wolfie2K3
  • China is whole lot different from what you describe

    The working class in China don't have as many laws as here in the States to protect their basic rights, which means they are open to all kinds squeeze from employers. To them, it's like the early stage of Capitalism, you know the late 19th and early 20th century of western world, where things are wild, people are screwed and the whole nation is learning how to run this system right.
    LBiege
  • RE: The price of a pink slip

    Read below news..What u get when u give pink slip in India ?


    http://www.ibnlive.com/news/ceo-lynched-minister-asks-
    firms-to-learn-lesson/74172-3.html?from=rssfeed
    hijaggu@...
    • RE: RE: The price of a pink slip

      Some might say that that bastard got what he deserved.

      Too bad American CEOs don't take a hint.
      fatman65535
      • Hello bfilipiak

        I am with you on this.

        Viva la France- Remember the French solution of about 1790!
        Lots of CEO's got the chop.
        elderlybloke
  • Deeper story in Japan

    While the law in Japan regarding severance may look similar to the US, in practice it is a very different situation. The culture is very much against the kind of layoffs that US companies consider routine. If a large Japanese company did anything similar without taking care of its workers, they would be publicly shamed, and both workers and customers would avoid it like the plague.
    terry flores
    • Well the fundemental difference

      is that in Japan, they still believe in honor and respect. Something that we Americans have seemed to have lost. Like I said coming home to the United States after being out of the country for a while sure does open ones eyes to just how messed up it is here. LOL, but most are too blind to see it or are still in denial... ]:)
      Linux User 147560
    • not so...

      Your information is out of date... and the statistics indicate the same.
      That used to be true. But now, the layoffs are significant in the CE industry. It doesn't always look quite as straightforward as you may think since the big companies are global and have to follow local laws when they have sites in other countries...
      ridingthewind