So much for gold watches Featured

10:05am EDT July 22, 2002

There's a common misconception that severance packages-the so-called "golden parachutes"- are reserved for Fortune 500 execs. But an increasing number of smaller companies are beginning to provide the perk.

A typical package is based on three main issues, says Stephanie Trudeau, a labor law attorney at Cleveland-based Ulmer & Berne P.L.L.-length of employment, reason for leaving and level of performance.

"You also have to consider the company's ability to pay," Trudeau says. "If the company is experiencing financial distress, and that's the reason for the termination, then no matter how much the company might want to pay this person, they may not have to ability to do that."

There is also no typical length of time for a severance package to run, Trudeau says, but those that exceed one year are considered rare. Besides financial compensation, other elements may be negotiated into the agreements-such as outplacement services and letters of reference.

Why the change among smaller firms? "In this age of increasing employment litigation, it's a strong motivator for employers to provide a severance package," Trudeau explains. "It says that in exchange for these benefits from the employer, the employee will not sue them."