Sprint reduces severance pay as layoffs loom

Sprint, headquartered in Overland Park, announced to employees that starting Feb. 1, the severance pay for those who are laid of will be lowered to one week’s pay for each full year at Sprint.
Sprint, headquartered in Overland Park, announced to employees that starting Feb. 1, the severance pay for those who are laid of will be lowered to one week’s pay for each full year at Sprint. File photo by The Kansas City Star

Sprint Corp., embarking on another round of layoffs, has told employees that severance benefits will shrink for those tapped after Jan. 30 to leave the company.

The Overland Park-based wireless company recently disclosed that job cuts will be a part of its effort to cut $2 billion in operating expenses during the next six months. It hasn’t said how many job cuts are coming or when they will hit.

But the end is coming for severance equal to two weeks of pay for each full year worked at Sprint. Two weeks has been a standard in severance packages at Sprint.

The new plan offers one week’s pay for each full year at Sprint for those notified after the end of January that they will be laid off, according to a letter to employees.

Also, a $1,000 “additional separation lump sum payment is no longer part of the plan,” said the letter from Sandy Price, senior vice president of human resources at Sprint.

Which plan applies depends on when the employee is notified, not the last day of employment. Employees notified before Feb. 1 would receive the higher severance benefits under the older plan.

It means layoffs will cost Sprint less if they come after Jan. 30.

“There will be notifications before that date,” Sprint spokeswoman Melinda Tiemeyer said. “We’re not waiting until then.”

Tiemeyer also said the job cutting has no targeted end date, which means layoffs may come after the lower severance plan is in place. She could not say whether expectations are for more layoffs to come under the current plan or the new lower-severance plan.

Employment law attorney Chris Hedican said he would expect “an appreciable number” of the layoff notices to come under the lower benefits plan.

“You don’t change the plan unless you want to save the money,” said Hedican at Baird Holm LLP in Omaha, Neb. “It could be that they’re changing it for the future, but I don’t know why you’d do it right now.”

Sprint said employees hired after Nov. 1 would be under the new severance plan.

In the letter to Sprint employees, Price made the point that the plan changes are in reaction to the need to cut costs. She referred to comments from CEO Marcelo Claure and newly appointed chief financial officer Tarek Robbiati.

“As Marcelo, Tarek and other leaders have shared, we are undergoing a transformation to radically change the way we do business. This effort addresses every aspect of our business to enable us to compete more effectively, serve our customers better, and grow revenue profitably. We must also reduce costs across the business,” the letter begins.

Claure has peppered employees throughout October with examples of cost cutting the company is taking. He told them in one of his weekly emails that there would be no pay raises this year.

He wrote that executives traveling for business were prohibited from “renting a limousine and a driver for an entire day” and have orders to take a taxi or use Uber. Snacks served in recent months at the executive offices are history, given that the tab would have added up to $600,000 over a full year.

Sprint plans on “going paperless” and “eliminating trash cans,” he wrote in a recent email to employees.

“I don’t want to tell you how much we spend on paper around here, but it is significant,” he wrote. “And requiring everybody, including all of the executives — even ME — to manage their own trash will be another reminder that the old ways of operating must change.”

Claure also has told employees the company is eliminating $500 million in equipment spending.

“We must save every dollar we can, which ultimately will help limit the number of jobs we need to eliminate,” Claure wrote in one note.

Price’s letter assured employees that Sprint remains “committed to providing a competitive separation plan for employees whose jobs may be impacted during this time of transition.”

Hedican said that, even with its changes, Sprint’s severance plan is “a little better than average,” adding that there is no legal requirement that a company provide severance pay.

Some plans pay one month of pay per year worked, but Hedican said one or two weeks per year served would be the “standard range” of severance.

Paying severance during layoffs helps employees stretch their budgets until they find new employment. It also helps employers, who often require the exiting employee to release the company from future claims as part of the process.

Tiemeyer said Sprint is not offering any voluntary job buyouts, which it did early this year when Claure announced plans to eliminate 2,000 jobs. Those cuts followed 1,700 job cuts last year.

Cutting payrolls through layoffs sends a signal to investors, said Gary Chaison, professor of industrial relations at Clark University in Massachusetts.

“They’re trying to signal to the investment community that they are taking decisive action, and that they are in control,” Chaison said.

Mark Davis: 816-234-4372, on Twitter @mdkcstar