Termination consideration

lharper · December 2003

We are thinking of offering medical insurance continuation for a period of time when we downsize for outsourcing. I know that unemployment benefits don't start until after any severance/vacation etc. monies stop. However, if an employee was just offered medical insurance for - say 3 months - while they are looking for a job. How would THAT affect unemployment? Would that be considered income? I'm in Indiana. Thanks.

Pork · December 2003

Why would you want to saddle current and retained employees with the expense of medical coverage provided to those that are being cut out of the picture? Your severence should include a three month premium, so that the x-employee can get their own medical insurance or none at all. Based on law, these x-employees will be offered COBRA coverage, which is expensive. Additionally, any claim paid on behalf of the x-employee is going to drive up the cost of medical insurance. That is bad enough, but my experience has been that COBRA coverage will not be taken unless there is a serious medical issue that arises after the fact of termination, and the individual will be faced with premium payment or loose medical coverage, which makes the current employee's premiums subject to an increase in cost.

For these reasons we stay away from including premium paid medical coverage for any period of time, regardless of the effect on some other government benefit. Your severance package can be as generous as you want it to be, the individual must explain to the UI case worker the benefits received. What concern or interest do you have in the effect of your package on someone's financial status?

Put your package together offer it and move on to the remaining employees, who are most important in this happening!

PORK

lharper · December 2003

Thanks - I see your point; I think this is a case of the owner feeling bad about the downsizing and wanting to make it as painless as possible for the departing employee. But you are right - they can use the money however they see fit and if that is to buy medical coverage so be it.

mbeam · December 2003

Would also take into consideration the view of how the package will look to those employees who aren't being terminated.

Depending upon your company culture, this isn't an element to overlook. If you're known for being family friendly and don't take care of those departing, those left behind may weigh their own employment options more closely than they would have before.

If you need them, this could be a double "whammy" you don't want to encounter. It also depends on your company size and if this is seen as a temporary measure that's needed - you may want to be a bit more generous. If business picks up you may want to rehire some of your former employees.

lharper · December 2003

Thanks for the answer - a good thought. Happy holidays1

Crout · December 2003

To answer your question, you'd have to check state law. Here in PA, only cash payments are considered when the UC office determines the level of benefit. Continuation of medical coverage is not.

lharper · December 2003

Thanks for the answer - that is true in Indiana also. Happy Holdiays!

Termination consideration

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