Severance: To Pay, Or Not To Pay. How A Looming Recession Could Impact Employee Retention In The Contact Center

So far, it seems that 2023 is the year of the layoff. From Twitter and Meta to Microsoft and Yahoo, organizations are grappling with the economic constraints of a potential recession and acting more conservatively in order to preserve their capital. Companies have been cutting costs by eliminating positions, products and even whole departments in what feels to some like a last ditch effort to save money. As trends like the Great Resignation, quiet quitting and rage applying continue on, organizations are being closely watched by the job market. The employee turnover rate in 2021 was nearly 50%, and in the contact center the numbers look equally bleak.

With technology rumored to replace customer service employees entering the workforce, potential new hires face a less than ideal industry that has them questioning what their value is in the CX world. And for those applicants fresh off a layoff, their value added to the customer experience isn’t quite clear. Multimillion dollar companies like Bed Bath & Beyond and Meta have reportedly failed to provide severance payments to throngs of employees that they’ve laid off, and the business community has mixed feelings on the situation.

Layoffs this year may sound unprecedented, but they are coming on the heels of a heavily over-hired pandemic-driven workforce. Many companies, unsure of how to navigate global shutdowns and remote work waters, onboarded new team members to compensate for the high volume of customers, calls and consumer demands that lockdown forced onto the global economy. And for the better part of two years, it wasn’t quite clear if the strategy even worked: despite there being more employees to carry the workload, employees still noted feeling overwhelmed by work during the pandemic. The impact was so vast that as more people were being funneled into the workforce, just as many people were leaving in an urgent move to preserve their financial, mental and emotional wellbeing. Even today, the hiring and firing song and dance continues and nobody is sure what the right move is.

In Customer Contact, Cutting Ties Means Cutting The Cord On Employee Relations

For those working in the customer contact space, the confusion surrounding hiring, firing, resigning, layoffs, pay and severance is palpable. According to CMP Research, in 2022 the median contact center attrition rate across all industries was 20%. In financial institutions and services industries, that figure was even higher. Over one-third of customer care agents say they are not likely to stay at their organization within the next six months, and those in finance and service had the highest percentage of agents not likely to stay at 41%. By comparison, almost 70% of employees across the U.S. labor force plan to leave their jobs in 2023 and more than half of employers anticipate that 30% or more of their workforce will be laid off in 2023. No matter how you look at it, employees are either leaving–or losing–their jobs. In terms of those that go of their own accord, vacation time payouts are within the realm of possibility. By comparison those who get suddenly cut, encouraged to leave or are forced to sever ties with their place of work walk out the door on less than desirable terms. 

In the event that an organization undergoes a mass layoff, under the federal Worker Adjustment Retraining Notification (WARN) Act, U.S. states require anywhere from 60-90 days to inform employees of the impending end to their employment. If an employer has violated the WARN Act, it will be required to pay out up to that amount of days in back wages and benefits. Following the announcement, workers can continue to receive pay and benefits up until the time of their termination. After termination employees may be entitled to severance pay, but it is not a guarantee. No state is legally required to provide employees with severance pay unless such compensation is specified in an employee handbook. If an employee is eligible for severance pay, such compensation will be determined by a person’s length of employment, company policies, and even performance. Employees can receive severance as a lump sum, or in installments.

Severance pay is a form of courtesy that organizations can extend to employees, but as we see today, it is a band aid on the bullet wound of a tumultuous job market. So far this year, more than 150,000 workers across approximately 530 companies have been laid off, and not all of them are satisfied with their severance package. Following staffing cuts, Salesforce is paying out as much as $1.4 billion in severance payments, totaling five months worth of wages for employees. Meta employees who were promised 16 weeks of severance pay received only eight, and Twitter team members were offered only one month of severance in exchange for a non-disparagement agreement and a waiver of their right to sue the company. As the gray area of severance pay is creating confusion, frustration and distrust in the workforce–especially among tech giants–it reflects a harsh reality that those working in customer contact are also facing as a result of overhiring and inability to account for pandemic pressure put on the customer experience.

At a time when pay rates are little to help employees survive the housing market, support their families, secure quality healthcare, prioritize investing, or even have a financial safety net in the event of an unprecedented event such as a pandemic or a layoff, the idea of losing a job is terrifying to even the “wealthiest” Americans: employees who earned more than $100,000 last year say they have little to nothing left over at the end of the month. In the customer contact space, where employees can be supporting CX in everything from healthcare to hospitality, job descriptions, skill sets, pay grades and opportunities for mobility will differ. Moreover, motivation to stay in the sphere of customer service might not be as prevalent in industries like technology, where companies are struggling to stay afloat and taking the ax to workers’ roles just to try and get ahead. While layoffs may be an avoidable part of the 2023 business model, trimming the fat in customer contact may do more harm than good for the industry. Statistics show that since the Great Resignation, service workers have left the industry altogether and opted for in-office roles that are less client-facing, despite the fact that even more traditionally corporate entities still may fall prey to layoffs.

As customer contact continues to become more digitized, connected and automated over time, its advancement is also creating some doubt for employees who aren’t sure if soon enough, advanced technology will be able to outdo them in their jobs. With the potential for job cuts being quite real in 2023, and no guaranteed promise of prolonged financial support in the event of a layoff during a volatile job market and economic downturn, customer contact leaders have much to consider in how they will lead, support, manage and invest in their workforce throughout the coming year. Although the hiring trends of 2020-2022 cannot be reserved, mindfulness in how to approach an over populated–or even overworked–employee base will be essential to the longevity of customer contact even as a recession looms. Taking into account where employee compensation and investment can strike a balance with technology development and strategic learning can allow room for debate on whether a layoff will be your organization's answer to financial stress. Are digital tools more valuable than interpersonal collaboration in your workspace? Only you will be able to discern the answer. And if at some point you must let team members go, keep in mind that they too are facing just as much uncertainty as they leave the confines of your organization and go elsewhere–be it to a competitor or even a different industry. Providing the best customer experience is also about providing the best employee experience. If we cannot do so with respect and regard for others, then we have more concerns on our hands than hiring trends show.

Photo by Andrew Neel on Unsplash: https://unsplash.com/photos/fqoYO9MjLLQ