Interesting enough, right after the Microsoft layoff, I conducted a Layoff Satisfaction Survey on my blog (see http://www.geekmba360.com/?p=551). Overwhelming majority of laid-off Microsoft workers rated their severance package as “Fair”, which is very rare among laid-off workers from other companies.

The media simply loves to sensationize stories. But, I think at least in term of severance compensation, Microsoft did better than majority of the employers.

There is a reason companies are held to different rules than employees: they have more power, they have more responsibility, they take the risk and reap the profits, and they also can eat the costs of mistakes when the risks don’t pay off (or the company is simply careless, as in this case).

It is unfair to let someone go, give them a severance check, let that person plan based on that amount, and then say, “Give us back part of that money—we were careless and overpaid you.”

Now if it was a large amount, that’s a different story. Someone owed $8,000 in severance who gets $12,000 obviously should think something’s up. But if she gets $8,800, she can validly claim that seemed right to her.

I heard of a payroll dept that accidentally overpaid an employee by about US$20,000 one month, because when they updated the payroll, someone entered the wrong figure and it wasn’t checked.

When they approached the employee, he said he hadn’t noticed (even though the overpayment was several months’ worth of salary), so they asked for the money back. Then he admitted he had already spent it all. They are now reclaiming the overpayment at $60 per month.

Now, severance is a bit different, because it’s not a regular amount, and it is reasonable to assume that the employee doesn’t know exactly what severance they are due. If I calculated my severance and the company paid me more, I would assume I had made the mistake, not the company.

Tonestapel – I think it is a different case with insurance. You are the experts, and we, as your customers, trust you to get it right, because we don’t know exactly what figure we should be getting, so yes, you eat the difference (and calculate the overpayment into the next set of premiums, no doubt).

With pay, we generally get the same every week/month, so it is reasonable to assume that the employee will notice any over or underpayment, so you can claim overpayments back.

Severance and bonus payments are half way between the two. You don’t know what you are getting, so you trust the employer to get it right. If they make a mistake, the company can correct it in an ongoing employment relationship. With severance, I agree with EHRL and think the company should cover it as far as reasonable.

“Anyone who has never made a mistake has never tried anything new.”