In 2024, 36% of HR leaders expected layoffs at their organizations within the following year. In LHH’s latest benchmark study, published on October 28, 2026, that figure is 66%. It nearly doubled in two years. If you run HR, finance or a business unit, severance planning just moved from a contingency folder to a date on the calendar.
This guide covers what the data says, how to build a severance package that holds up legally and ethically, and how to pair it with a workforce strategy so you aren’t repeating the exercise every quarter. It’s written for CHROs, HR heads, founders and finance leaders in India and other markets who would rather plan now than improvise later.
What does the 2027 layoff data actually say?
LHH surveyed 600 HR and business leaders at US organizations with 500 or more employees between September 9 and 22, 2026. Here’s what came back:
- 66% of HR leaders expect reductions in the next 12 months, against 36% in 2024.
- 72% of business leaders expect them too, and the figure reaches 80% among CEOs.
- 38% of organizations have made severance less generous, up from 9% in 2024. Another 56% made it more generous, down from 76%.
- 85% now offer career transition support to exempt employees and 79% to non-exempt employees (61% and 58% in 2024).
- 99% routinely evaluate alternatives to layoffs. The most common are retirement incentives (42%), voluntary departure programs (41%), redeployment (38%) and temporary leave (38%).
- CFOs lead outplacement decisions at 18% of organizations, up from 6%. HR leads at 30%, down from 58%.
Two things stand out. First, severance policy is splitting. Some employers are paying more to protect their reputation and the people who stay, while a growing group is trimming packages to protect cash. There’s no industry consensus, which means your package will be compared against both camps.
Second, finance has moved into a conversation HR used to own. If you walk into that room with feelings instead of costed scenarios, the spreadsheet wins.
A caution on the numbers. This is a US sample of larger employers, and an expectation isn’t an announcement. Still, the direction matches what other 2026 research reports. Mercer’s survey of 12,000 respondents, as covered in the trade press, found nearly all executives expecting AI-driven headcount reductions within two years. Our own interview with Subramanyam Sreenivasaiah on AI, talent and human-centric work covers the people side of that shift.
How do you plan severance for 2027?
Severance planning means fixing the legal minimum first, then adding tenure-based pay, benefits continuation and career transition support on top of it. Do all of this before anyone is told anything, and tie it to a workforce plan that shows which roles you’re keeping, redeploying or cutting.
Here’s the order that works.
1. Write down the business case and the scope
What problem are you solving? A cost gap, a skills gap created by automation, a product you’re shutting down? Each answer leads to a different set of roles and a different package. Be specific about numbers: how many roles, in which teams, over what period. Vague scope is how a “small adjustment” becomes three rounds of cuts.
2. Set the legal floor
This is the step people rush, and it’s where the expensive mistakes live.
India. The Industrial Relations Code, 2020 is now in force, with the Industrial Relations (Central) Rules, 2026 notified in May 2026. For retrenchment of covered workers, the Code requires one month’s written notice or pay in lieu, and retrenchment compensation of 15 days’ average pay for every completed year of continuous service (a part-year above six months counts as a full year). Employers also pay 15 days’ last drawn wages per retrenched worker into the Worker Re-skilling Fund. Notice timelines to the government and the need for prior permission depend on establishment size, with larger establishments facing stricter rules. Managerial and supervisory staff usually fall outside “worker” as the Code defines it, so their exit terms come from contracts and company policy. Classification matters. Get it wrong and the process can be challenged.
United States. There’s no federal severance requirement, but the WARN Act generally requires 60 days’ written notice for plant closings and mass layoffs at employers with 100 or more employees. Several states add their own rules.
Whichever market you’re in, have labour counsel check your numbers before you commit to a package. This article is general information, not legal advice.
3. Decide what goes above the floor
The legal minimum is a floor, not a package. Above it you’ll typically choose a tenure-based formula, how long benefits such as health cover continue, how you handle unused leave and variable pay, and whether long-serving or critical-to-transition employees get something extra. Pick a formula you can explain in two sentences. If a manager can’t explain it to an employee without a calculator, it will feel arbitrary.
4. Price it before you announce it
Here’s a simple illustration, using made-up numbers. Take a covered worker with six completed years of service and an average monthly pay of ₹40,000. Using the 26-working-day convention many employers apply, 15 days’ average pay per year works out to roughly ₹1,38,462 in retrenchment compensation. Add notice pay, the re-skilling fund deposit, leave encashment and any gratuity due, and the true cost per person is noticeably higher than the headline figure. Multiply across the affected group and you have the number finance will ask about.
5. Add support that isn’t cash
Career transition help is now standard in the LHH data, and for good reason. It costs less than a cash top-up and employees remember it longer. Think résumé support, interview coaching, referrals into your own network and a clear reference policy. If you have open roles elsewhere in the company, say so, and tell people how to apply first.
6. Document and sequence the communication
Write the script, the FAQ, the manager briefing and the timeline before the first conversation. Tell affected employees first and in person where possible. Tell everyone else the same day. The worst version of this is a rumour doing the announcing for you.
What a complete severance package covers
| Component | What to decide | Common trap |
| Statutory entitlements | Notice, retrenchment compensation, gratuity, final wages | Misclassifying who is a covered worker |
| Tenure-based pay | Formula above the legal minimum | A formula nobody can explain simply |
| Benefits continuation | Health cover and its end date | Cover ending the day of exit |
| Leave and variable pay | Encashment and bonus treatment | Silence on bonuses until the last minute |
| Re-skilling fund (India) | Deposit timing and employee communication | Forgetting it in the budget |
| Career transition support | Coaching, referrals, references | Offering it only to senior staff |
How does workforce strategy reduce the number of people you cut?
The LHH finding that nearly every organization evaluates alternatives is the part of the study most leaders skip. It shouldn’t be. Retirement incentives, voluntary departure, redeployment and temporary leave all cost money, but they let you shape who leaves instead of choosing by role alone.
Before you finalize a list, map skills against the work you’ll need in 18 months, not just the work you’re doing today. Roles that look redundant in a budget review sometimes sit next to open needs in another team. Redeployment only works if you know what people can do, so run a skills inventory first. Employee survey data helps here, because it shows where capability and engagement sit before you disturb either.
Then look at the cost of getting this wrong. In a 2025 Careerminds survey of 600 HR leaders, 78% reported multiple rounds of layoffs within a year, and many described morale damage afterwards. A separate Careerminds study found 40% of HR leaders saying layoffs led to higher voluntary turnover. People you wanted to keep left anyway. One well-planned reduction costs less than three rushed ones.
How should you treat the people who stay?
Survivors watch how the exits were handled and draw conclusions about their own future. If departures looked fair and generous, trust holds. If they looked abrupt, your best performers start updating their résumés.
Spend as much planning time on the remaining team as on the departing one. Explain the new priorities, who owns what, and what you’re not going to ask of them. Hold open conversations with managers, who are carrying a heavy load. And don’t pretend things are normal. We’ve written before about why good work culture is now a business strategy, not an HR initiative. A layoff is where that claim gets tested.
Mistakes that make layoffs more expensive
- Deciding by spreadsheet alone: Cost cuts that remove critical skills get reversed later, usually at a higher price.
- Cutting in rounds: Each round resets trust to zero.
- Treating the legal minimum as the whole package: It protects you from a claim. It doesn’t protect your employer brand.
- Ignoring rehire rules: Under India’s 2026 Rules, if vacancies open within a year of retrenchment, eligible retrenched workers get preference. Plan your hiring calendar accordingly.
- Leaving the announcement to chance: Control the timing or someone else will.
Frequently asked questions
How much severance should a company pay?
In India, covered workers are entitled to at least 15 days’ average pay per completed year of service under the Industrial Relations Code. Above that, it’s a policy choice. Benchmark against peers in your industry and size band, and make sure the formula is consistent across teams.
Is severance pay legally required?
It depends on where you operate and who is affected. In India, retrenchment compensation is mandatory for covered workers. In the US there’s generally no federal severance requirement, though WARN notice rules, state laws, contracts and company policy can create obligations.
How much notice do employees need before a layoff?
In India, the Code requires one month’s notice or pay in lieu for covered workers, plus notice to the government. Timelines vary with establishment size, so check the 2026 Rules for your case. In the US, WARN generally requires 60 days for qualifying employers.
What is the Worker Re-skilling Fund?
It’s a fund created under the Industrial Relations Code. For each retrenched worker, the employer deposits 15 days’ last drawn wages, which are credited to the worker within 45 days of retrenchment, to support reskilling.
Where to start this quarter
If you expect reductions in 2027, begin with a short list of jobs: confirm which employees are covered by which rules, run a skills inventory, cost two or three scenarios with finance, and draft the communication plan. None of that requires an announcement, and all of it makes the hard conversations less hard.
Amazing Workplaces works with startups, MSMEs and enterprises on employee engagement surveys and workplace practices that show you where your people stand before a restructuring, and how they feel after one. If you’d like to understand your team’s sentiment before you plan, reach out to us through our site.
This article is for general information and isn’t legal advice. Confirm statutory entitlements with qualified labour counsel before communicating any package.
