Why Severance Is Structurally Inefficient

Content Summary

Most companies don’t design a severance strategy—they inherit one.

Severance has become the default approach to supporting employees during layoffs. It’s familiar, relatively easy to implement, and widely accepted. As a result, it’s rarely questioned.

But when you take a closer look at how severance actually works—especially from a tax, timing, and structural perspective—it becomes clear that it may not be the most efficient or effective approach.

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