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Comment by tcard | Hacker News Reader

Other things equal, if companies need to pay severance, employees get paid less each month, because companies need to take into account expected severance costs in their total labor costs and there's less money left for other benefits.

So all employees effectively pay for layoffs, which goes against you if you're not the one that gets laid off.

(I am very much in favor of mandatory severance and generally other kinds of safety nets.)

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Having done budgeting for hiring employees in the UK, for small and medium sized companies, the factors that went into calculating staff costs never included any severance or redundancy factors. Paying redundancy is relatively rare, so doesn't need allocated funding until you're in that process.

When you're employing people you're not already thinking about their future exit. You hire based on your growth, so you're usually optimistic about the future and thinking about employees being long term. If not you hire contractors, who you can lay off easily.

Part of this is that you can't just fire people without good cause and without following a process. There are probationary periods to allow the hire to be let go if they don't work out in the first 6 months or so, but after that you're into a long "managing them out of the business" process that may or may not end up with a pay off.

> When you're employing people you're not already thinking about their future exit. You hire based on your growth, so you're usually optimistic about the future and thinking about employees being long term. If not you hire contractors, who you can lay off easily.

+1 for the contractors thing. If there is already an expiration date for these people, then make them a contractor or reach out to a staffing firm.

> but after that you're into a long "managing them out of the business" process that may or may not end up with a pay off.

I'm sure you already know, but in the UK you can be fired for any non-protected reason within the first 2 years of employment. I think UK companies are typically less cavalier than their US counterparts when it comes to firing, but in the frist 2 years, the employee protections are similar to US at-will states.

This forgets the high likelihood that the amount that would have been paid as severance goes to the pockets of the owners and leadership. The market pays what the employees are worth, not what is left over after costs.

> So all employees effectively pay for layoffs, which goes against you if you're not the one that gets laid off.

Or you could say that the company needs to save the profit generated by your position until it equals your anticipated severance before paying dividends from that profit. So it’s still a drag on profits, but it has nothing to do with other employees.

> So all employees effectively pay for layoffs, which goes against you if you're not the one that gets laid off.

Sounds like a very acceptable compromise. I'm happy to chip in. I'm also happy that I pay taxes for universal healthcare so that I can take advantage of that when I'm in a disadvantaged position, but that's me.

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