The $500K Mistake

That’s a lot of money.

by Sarah Rodehorst

I recently spoke to a Fortune-500 HR executive about the company’s employee separation process. When asked about severance pay, he responded, “I am not sure how we calculate severance, but I know it isn't perfect.”

He was right — it was far from perfect. He told me about one of the biggest severance mistakes he’d seen firsthand. A former executive within a business unit he supported received a severance overpayment. But this wasn’t just a minor blunder. Rather, a simple clerical error in Excel led to a $500,000 severance overpayment. The pain was very real.

The company never recuperated the money, either, due to fear that any attempt to recover the overpayment would result in bad press and, even worse, litigation. The former employee was $500,000 richer, and the employer was $500,000 poorer. Ouch.

I’ve heard similar stories more times than I can count, especially as companies turned to layoffs and furloughs to survive the pandemic. Though the details change from story to story, the plot is the same. Separation mistakes are COSTLY — and they can be avoided.

Onwards HR wasn’t created merely as a means to simplify the separation process. It was developed with risk management in mind. Whether calculating severance pay or complying with Department of Labor (DOL) and Equal Employment Opportunity Commission (EEOC) regulations, Onwards HR mitigates human capital risk. The result is a better separation process for employers and employees — although maybe the executive with the extra $500,000 would disagree.