Refers to the process of comparing an organization’s severance pay practices and separation benefits against those of similar employers, industries, or labor markets to determine whether policies are competitive, fair, financially sustainable, legally defensible, and aligned with current norms.

Severance benchmarking may include reviewing weeks of pay per year of service, minimum or maximum payouts, continuation of health benefits, treatment of bonuses or equity, outplacement services, and differences by employee level or job category. It is commonly used during layoffs, reorganizations, mergers, executive transitions, or when updating formal severance policies.

More recently, interest in severance benchmarking is expected to grow as organizations respond to automation and AI-related workforce changes, where employers are increasingly judged on both efficiency gains as well as how they support workers through job disruption and transition.