Who is eligible for severance pay? 2027 benchmarks

 

Most US companies pay severance, but not every employee qualifies. According to LHH’s 2027 Severance and Separation Benefits Benchmark Study of 600 US leaders, 92% of organizations pay severance. About 70% offer it to senior leaders, and 51% offer it to non-exempt employees. Eligibility usually depends on an employee’s level, the reason they’re leaving, and the terms of their employment agreement.

Who qualifies for severance?

“When do I qualify for severance?” is one of the most common questions employees and HR leaders ask. The answer has shifted in the last three years.

Workforce reductions are sometimes the only way to protect or grow a business. With 69% of organizations expecting layoffs in the next 12 months, more employees and HR teams need clear answers about who gets severance and when.

LHH surveyed 600 US leaders for its tenth Severance and Separation Benefits Benchmark Study. Here’s what the data says about severance eligibility today.

Key findings at a glance

• Most companies pay severance. 92% of organizations pay it, whether or not they have a formal policy.
• Eligibility is more even across levels. According to LHH’s 2027 study, 70% of organizations offer severance to CEOs, down from 91% in 2024. Eligibility for non-exempt employees rose from 45% to 51%.
• Employment agreements matter. 90% of organizations define severance in employment agreements, most often for top executives.
• Mergers bring special terms. 85% of organizations make special severance provisions for a merger, acquisition, or change of control.
• Severance often comes with conditions. 64% require employees to sign a release in exchange for severance.

Who is eligible for severance by level?

The gap between the top and the frontline has narrowed sharply. According to LHH’s 2027 study, CEO eligibility outpaced non-exempt eligibility by 46 points in 2024. Today the gap is 19 points.

• CEO: 70% (down from 91%)
• Senior management: 70% (down from 91%)
• Directors: 71% (down from 92%)
• Managers: 66% (down from 88%)
• Supervisors: 67% (down from 80%)
• Professional/technical: 67% (down from 74%)
• Exempt: 54% (no change)
• Non-exempt: 51% (up from 45%)

With more layoffs expected, organizations are stretching separation budgets across more of the workforce. That means less at the top and broader coverage below it.

Do companies need a formal policy to pay severance?

No. 92% of organizations pay severance, but fewer have a formal policy for each level. Many decide case by case, especially for frontline roles.

Share of organizations with a formal severance policy, by level:

• CEO: 72%
• Senior management: 69%
• Directors: 71%
• Managers: 65%
• Supervisors: 67%
• Professional/technical: 69%
• Exempt: 59%
• Non-exempt: 53%

Nearly half of organizations have no formal policy for non-exempt employees. For HR teams, that gap creates risk. Without written terms, similar employees can receive very different packages.

When do companies pay severance?

Companies pay severance in a range of situations. According to LHH’s 2027 study, no single circumstance dominates:

• Termination for cause: 37%
• Reduction in force or corporate restructuring: 37%
• Voluntary termination: 36%
• Involuntary termination: 35%
• Change of control, single trigger: 31%
• Change of control, double trigger: 31%
• Retirement: 30%

Reductions in force and restructuring. Market shifts, new technology, and competitive pressure drive most restructuring. In 2026, AI became the most commonly cited reason for announced US job cuts. Severance helps employees bridge the gap to their next role.

Involuntary termination. Many companies pay severance when they let an employee go for reasons other than a layoff. The amount usually depends on position level, years of service, and company policy.

Voluntary departures and retirement. Some companies build severance into retirement strategies and voluntary separation programs. More than 9 in 10 organizations offer voluntary separation or retirement packages at every level from CEO to professional/technical employees. Eligibility drops to 86% for exempt employees and 79% for non-exempt employees.

How does a change of control affect severance eligibility?

Mergers, acquisitions, and other major ownership changes often trigger special severance terms. According to LHH’s 2027 study, 85% of organizations make special provisions for a change of control.

Companies structure these provisions in two ways:

• Single trigger. The change of control alone makes the employee eligible.
• Double trigger. The employee qualifies only after a change of control plus a second event, such as a job loss or a major change in role or location.

These provisions favor senior roles. Among organizations that offer them, 42% cover CEOs and 17% cover non-exempt employees.

What change of control provisions include:

• More generous health and supplemental benefits: 49%
• More generous outplacement: 49%
• More generous severance: 46%
• Immediate vesting of stock options: 35%

What role do employment agreements play?

Employment agreements often spell out who gets severance and how much. According to LHH’s 2027 study, 90% of organizations define severance in their employment agreements.

• 73% define it for top executives only.
• 17% define it for top executives and others covered by employment agreements.
• 10% don’t define severance in employment agreements.

What conditions come with severance?

Eligibility doesn’t always mean an automatic payment. Most organizations attach conditions:

• Release of claims. 64% require employees to sign a release, an agreement not to sue the organization, in exchange for severance. 65% require one for outplacement.
• Enhanced severance for a release. 60% offer more severance to employees who sign a release.
• New employment. 62% stop severance payments when the employee finds a new job.
• Appeals. 61% have a process for employees to appeal or negotiate their package.

How does your severance compare? Use the LHH severance calculator to benchmark your policy against peers.

How much severance do eligible employees receive?

Severance amounts depend on the formula a company uses. According to LHH’s 2027 study, 40% of organizations now base severance on age, length of service, level, and ability to find new work, up from 22% in 2024.

Companies that use flat weeks by level pay CEOs 6.3 weeks and non-exempt employees 4.2 weeks on average. For the full breakdown, read How much  severance should companies pay?

How do you set clear severance eligibility rules?

Clear eligibility rules protect your people and your business. Use these benchmarks to check your policy:

• Write it down for every level. Nearly half of organizations lack a formal policy for non-exempt employees. Written terms keep packages fair and consistent.
• Define the circumstances. Spell out which departures qualify, including restructuring, involuntary termination, retirement, and change of control.
• Set the conditions. Decide whether you’ll require a release, stop payments when someone finds a new job, or allow appeals.
• Plan for a merger. Decide in advance which levels a change of control covers and whether you’ll use a single or double trigger.

Frequently asked questions

Who is eligible for severance pay?
According to LHH’s 2027 study, 70% of US organizations offer severance to CEOs and senior management, and 51% offer it to non-exempt employees. Eligibility usually depends on level, the reason for leaving, and the employment agreement.

Do companies have to have a severance policy to pay severance?
No. 92% of organizations pay severance, but only 53% have a formal policy for non-exempt employees, according to LHH’s 2027 study.

Do you get severance if you’re fired for cause?
Some organizations pay it. According to LHH’s 2027 study, 37% of US organizations provide severance for termination for cause.

What is a double trigger severance provision?
A double trigger provision pays severance only after two events: a change of control, such as a merger, plus a second event like a job loss. A single trigger pays severance after the change of control alone. 31% of organizations use each type.

Do you have to sign a release to get severance?
Often, yes. 64% of US organizations require employees to sign a release in exchange for severance, according to LHH’s 2027 study. 60% offer more severance to employees who sign one.

Benchmark your severance policy

See how your severance eligibility and benefits stack up by industry, company size, organization type, region, and role. Try the LHH severance calculator