Why It’s Time to Rethink Severance — and Who It’s Actually For
Layoffs happen. Sometimes they’re strategic. Sometimes they’re reactive. But whether it’s a single role being eliminated or a sweeping cost-cutting measure, one question always matters: what happens to people when they leave?
For high-level executives, there’s usually a soft landing. Exit packages. Advisory roles. Months of runway.
But what about the people without a parachute?
Skilled hourly workers. Line supervisors. Front-line managers. The ones who rarely get severance, and when they do, it’s usually a one-time payment that barely lasts beyond the bills of the month. These are the people who often keep businesses running—and yet when cuts come, they’re left navigating job loss with nothing but state unemployment insurance (UI), which in many states covers only a fraction of prior wages.
This is where Supplemental Unemployment Benefit (SUB) Plans come in.
SUB Plans: A More Equitable Alternative to Severance
SUB Plans are intended to provide employees with a bridge between jobs—a way to maintain financial stability and maintain eligibility for unemployment benefits. Unlike severance, which is typically paid out as a lump sum and can delay UI eligibility, SUB pay is designed to work in conjunction with state unemployment..
Here’s how it works:
- The company establishes a SUB plan to pay benefits to employees subject to a position elimination or reduction in force.
- These benefit payments are coordinated with state UI, making the employee’s total weekly income 100% of their prior regular wages during their benefit period.
- If the employee finds a job sooner than expected, payments stop, and in some plans, they may receive a reemployment bonus.
- There are tax advantages too—SUB payments are classified as benefits, not wages, which means they’re not subject to payroll taxes for the employee or the employer.
Why More Employers Are Considering SUB
In a time when many companies are under pressure to cut costs while preserving culture, SUB Plans offer a middle path:
- Cost-effective: Employers can reduce the cost of their severance plans and offer affordable separation benefits more widely across their employee population.
- Flexible: Plans can be tailored by role, location, or layoff type—furloughs included.
- Human-centered: Employees feel supported and valued even during a separation, protecting employer brand and reputation.
Most importantly, SUB Plans allow employers to extend support beyond senior management. They provide the kind of safety net that doesn’t rely on job title or tenure—but on the simple belief that all workers deserve a parachute.
Who Needs This Most?
Not every business can afford months of severance for every employee—and that’s exactly why SUB Plans matter. They are especially relevant for:
- Manufacturers, retailers, and logistics companies with fluctuating labor needs
- Tech and startups navigating unpredictable market shifts
- Organizations that value equitable treatment across all employee levels
When used proactively, SUB Plans can become part of a broader workforce strategy. They send a message: even in tough times, we don’t leave people behind.
Final Thoughts: It's Time to Expand the Parachute
Severance has traditionally been seen as a reward for loyalty for a select few. But the future of workforce support lies in designing benefits that include the people who need them most.
SUB Plans aren’t just about saving money or reducing legal risk—they’re about doing better by your people.
Because when the economy shakes, or the budget tightens, or restructuring hits… we all ask the same question:
What happens to the people without a parachute?
Maybe it’s time we give them one.