Golden Handshake: A Compassionate Departure for Laid-Off Employees

In times of organisational restructuring, layoffs become an unfortunate reality, impacting both businesses and employees. While the decision to let go off employees is often driven by financial constraints or strategic considerations, it is essential for organisations to prioritise the well-being and dignity of those affected. 

Recognising the impact of such decisions, forward-thinking companies have embraced the concept of a "Golden Handshake" as a compassionate departure strategy. The approach has gained traction as a compassionate departure strategy aimed at providing support and assistance to laid-off employees during the transition period. In the wake of implementing this approach, organisations are demonstrating their commitment to treating employees with respect and empathy even in challenging times, contributing to a more compassionate and responsible workplace culture.

According to Dheeraj Modi, VP & Global HR Head, NLB Services, primary thinking behind the concept of a golden handshake is to offer a mutually beneficial exit strategy or early retirement package for employees who are nearing the end of their careers or may be redundant due to changes in the organizational structure or any other reason.

The Essence Of Golden Handshake

A Golden Handshake is more than a legal requirement or a standard severance package; it goes above and beyond to ensure that laid-off employees are treated with respect, understanding, and fairness. It encompasses a range of benefits, support services, and additional resources to help individuals navigate the challenging process of transitioning into new opportunities. This compassionate departure approach acknowledges the emotional toll layoffs can have and strives to mitigate the negative impact by offering a helping hand.

Offering a golden handshake to laid-off employees is an effective way to provide them with financial support and benefits that go beyond the required or statutory severance pay. It typically includes a lump sum severance payment or extended severance pay. Retention of benefits such as extended healthcare coverage and continued participation in employee benefit funds or stock option plans can also be part of the package. This helps to alleviate financial stress and provide a cushion while employees search for new roles. This additional financial assistance could help cover living expenses and other financial obligations, offering a sense of security and stability during a challenging transition period.

“In addition to the financial and benefits aspect, a golden handshake demonstrates appreciation for employees' contributions and acknowledges the emotional impact of job loss. This gesture seeks to preserve the morale and dignity of affected employees, reducing the negative psychological effects often associated with layoffs. So, while a golden handshake is likely to cause some financial burden on the employer in the short term, it is an effective mechanism to support employees in the event their employment is lost for no fault of theirs,” believes Vihang Virkar, Partner, Lumiere Law Partners.

Difference Between Golden Handshake And Severance Packages

Golden Handshake and severance packages are both compensation arrangements provided to employees who are being laid off and facing job termination.

Amit Das, Director-HR & CHRO, Bennett Coleman explains, “the boundaries for Golden Handshake are governed more by organisation’s EVP and organisational values than just legal obligations. New "Golden Handshake" policy goes beyond monetary package to include outplacement support and services of counsellors to help affected employees manage the emotional turmoil.” 

An essential part of such a policy is to treat the pool of separated employee as future talent when the opportunity arises.

While Modi on the other hand feels, “golden handshake, is an early retirement package voluntarily offered to long-term employees who are nearing the end of their careers or whose positions may be made redundant due to organisational changes. Its goal is to incentivise retirement while providing financial and job security to retiring employees.”

A golden handshake often includes supplementary benefits and perks that are not commonly found in traditional severance packages. These benefits may include extended healthcare coverage, pension enhancements, continued access to company resources and even job placement assistance. The aim could be to provide comprehensive support to employees beyond mere financial support and acknowledge their contribution to the employer.

“In terms of market perception, golden handshakes are often seen as more favourable and can contribute to positive employer branding, enhancing the company's reputation among employees and future candidates. On the other hand, traditional severance packages are generally seen as a legal obligation to provide financial support when terminating employees,” explains Virkar.

Both packages help to ensure that employees are treated fairly and respectfully, which can enhance an organisation's reputation and overall performance.

Explaining The Brighter Side Of “Golden-Handshake” To Employees

So, while explaining the positive aspects of a Golden Handshake to employees, it's important to emphasize how this compassionate departure strategy benefits them.

Das further explains, “business managers and respective HRBP’s must prepare well before getting into dialogue with affected/ identified employee to answer his query. Emphasis should be on business scenario leading to such decision and any reference to individual assessment must be avoided.”

Approaching the communication of the "Golden Handshake" policy with transparency, empathy, and clarity, employees can gain a comprehensive understanding of the reasons behind the policy and its benefits,” explains Virkar. 

We can Consider the following key points when communicating this policy to your employees:

• Preparation: Prepare a clear and concise explanation of the policy, including eligibility criteria, financial aspects, additional benefits, and any associated timelines.
• Timing and physical interaction: Select an appropriate time to communicate the policy, considering the emotional impact it may have on affected employees. Consider conducting in-person meetings or physical townhalls, rather than sending an impersonal email. The physical interaction could be followed up by written communication clarifying the exact terms and conditions. 
• Customise communication: Prepare separate messaging for affected employees and those who are not impacted and address the concerns of each group. For affected employees, provide detailed information on how the policy will benefit them financially and emotionally. For unaffected employees, emphasize the rationale behind the policy and how it contributes to maintaining a positive company culture and long-term stability.
• Encourage a two-way communication: It is important that employee feel comfortable asking questions and clarifying their doubts with the employer, rather than engage in gossip and trying to form conclusions based on ill-informed conversations. Offer resources like FAQs, contact information for relevant departments, or access to HR representatives who can provide further assistance. 
• Delivery on-point: Ensure that the policy is implemented accurately and that employees get exactly what has been communicated to them. This will avoid any confusion and will also help limit exposure for the employer to potential legal or other action by any employee.

By highlighting these positive aspects, employees can see how a Golden Handshake offers them support, resources, and a dignified exit from the organization. It showcases the organisation's commitment to their well-being and helps them transition to new opportunities with confidence and positivity.