I recently observed a heated startup mailing list discussion about whether a to give severance to an employee of a early stage (but funded) startup. Most of the discussion focused on what was legally required and whether or not to couple severance with a separation agreement. This was my response:
I hate severance. Hate it. The thought of paying someone I was forced to fire because he (or she) is incompetent burns me up inside.
However. I always provide severance and I always require a departing employee sign separation agreements. For everyone from an executive to the janitor.
Why? Because it’s a small town and current and future employees will notice how you take care (or don’t take care) of people on their way out.
Other employees won’t always know why a former employee was fired, but they will know that you fired them with little notice* and no severance. It just looks bad and makes people worry about working for you.
Cash isn’t king. Your reputation is.
But then again. I’ve been told I’m a bit old school.
- I know it’s “little notice” because you’re a startup and thus you would be foolish to spend time on lots of remediation. Hire slow. Fire fast.