As hard as it is to say, New Jersey businesses are no strangers to layoffs. No business is, really, because things change, and people change, even in the best of economies. Business law professionals will tell their clients time and time again that planning for even an unlikely event is always a good idea -- especially where employment issues are concerned, and especially when it comes to something as sensitive and as highly litigated as letting someone go.

This isn't only about golden parachutes. A severance plan can save a business owner or executive a lot of headaches. There are a few things he or she should keep in mind when developing the plan.

First, pay attention to the Employee Retirement Income Security Act. ERISA governs most plans, and all plans covered by ERISA must be in writing.

Second, look at the business and the employee structure. Think about whether every employee should have the same severance benefit. A good plan can round out a compensation package when attracting high-level managers or employees with specific expertise to the company. Should the mailroom clerk get the same package?

ERISA requires an employer to distribute a summary plan description to all eligible employees. Management experts say this is one reason to have different plans -- not just different levels within one plan -- for different employee groups.

Other questions to ask early in the planning phase include how long the severance plan will be in effect. Experts recommend regular reviews, but they also recommend reserving the right to revise the plan. Establish a process for review and revision, and stick to the process.

We aren't quite done yet. We'll finish this up in our next post.

Source: HR.BLR.com, "6 Tips for Handling Severance Pay Plans," Terry Price, Dec. 1, 2011