Why more employers are turning to SUB Plans as a cost-effective, people-first alternative to severance
Layoffs are hard. For employees, they represent the sudden loss of income, structure, and security. For employers, they’re often a reluctant decision made under pressure—from market shifts, budget cuts, or temporary shutdowns.
But when it comes time to reduce your workforce—whether permanently or just for a season—the how matters. Offering support to departing employees isn’t just a kindness; it’s a reflection of your values, a way to protect your employer brand, and a signal to the rest of your team that people come first, even in hard times.
The challenge? Severance is expensive—and not always efficient. That’s where Supplemental Unemployment Benefit (SUB) Plans come in.
A Smarter Way to Support Employees
SUB Plans are designed to work in coordination with state unemployment insurance (UI). Instead of providing a one-time severance payout, employers offer weekly SUB payments on top of the state UI an employee is eligible to receive. Together, the two payments bring the employee up to a target percentage of their pre-layoff wages—often 80% to 100%.
Here’s why that matters:
Cost Savings Through Unemployment Offsets
With severance, you pay the full amount upfront—regardless of whether someone finds a new job the next week or not for months.
With a SUB Plan, the cost is partially offset by the state. If an employee qualifies for $400/week in UI and your target wage replacement is $1,000/week, you only pay the $600 difference. That offset is dollar-for-dollar—and because SUB payments are classified as benefits instead of wages, you save again by avoiding payroll taxes like Social Security and Medicare.
The result? You spend less, and employees receive more.
Not Just for Permanent Layoffs
SUB Plans aren’t just for permanent reductions in force—they’re also a smart solution for:
In each case, SUB helps you retain your workforce during the downtime while giving employees meaningful income continuity—without permanently losing your talent or overextending your cash flow.
A More Sustainable Approach to Workforce Changes
At a time when reputation matters and every dollar counts, SUB Plans offer a rare combination of financial efficiency and human compassion. They show employees you care—not just while they work for you, but when they leave. And they offer your organization a way to manage transitions without sacrificing your values or your bottom line.
If your company is facing difficult decisions, it doesn’t have to be a choice between empathy and economics. With the right plan in place, you can have both.