DEAR JOYCE: My husband is a mid-level manager in sports gear, and our family's financial status isn't all that comfortable. If a boom in terminations occurs, is there a law that requires employers to provide severance pay? -- H.G.R.

No. Other than exceptions for contractual obligations, severance pay is a gift. But, for several reasons, smart employers accept paying severance benefits as a cost of cutting costs. Survival of the company is one of the key reasons.

PLUNGING PRODUCTIVITY. Research finds that a company's layoff survivors take note if departing coworkers were mistreated -- realizing they, too, may someday be looking for an exit package -- and become demoralized. Survivors also report resentfulness over the extra work they must shoulder and allow their productivity to slump.

Specifically, a majority of surviving workers say the service customers receive has declined, and they see more errors and mistakes being made. (Visit ere.net; search for "Guilt, Anger Cuts Productivity Says Layoff Survivors" by John Zappe.)

LEGAL PROTECTION. Companies award severance in return for a quid pro quo. To collect the cash and benefits in a parting package, the dismissed worker must waive all rights to sue the company. Mass layoffs are especially worrisome from a legal perspective, because the people let go tend to be higher-paid workers who, unsurprisingly, often are older and may raise age-discrimination challenges.

Litigation avoidance used to be the rationale offered by terminated employees and their lawyers to negotiate an improved severance deal. Even so, BusinessWeek (Nov. 3, 2008) reports that "Employees' ability to improve a severance offer has declined as the economy has tightened."

In fact, the magazine quotes a San Francisco attorney as saying he's seen an increase in companies scrutinizing years of expense reports and checking whether a terminated executive visited inappropriate Web sites, doing so to find excuses to deny severance.

FUTURE RECRUITMENT. Still another reason smart companies not contemplating Chapter 7 come across with decent severance awards is their executives understand the long-term consequences sparked by roughshod treatment of employees. Corporate staffing consultant Gerry Crispin (careerXroads.com) explains:

"Companies in this economy are letting their employees go with little notice. Within hours of the decision, axed staffers are told to clean out their desks and are escorted off the premises. The last straw: They're getting no outplacement and minimal severance."

Company reputation is critical, says Crispin's CareerXroads partner, Mark Mehler. Alluding to companies that flub layoffs and stiff workers on severance, Mehler says: "The long-term choices of a new generation of employees reluctant to return to corporate life will hurt stockholders and employers for years to come. In the meantime, survivors will tell recruiters the names and contact info for the best people who have left, as well as the best that remain. And survivors will be more likely to jump at the first opportunity."

TRENDS. Unhappily for workers, the downsizing occurring as the economy sags is also producing a downsizing in what companies are willing to pay outgoing employees. The "standard" severance of one or two weeks' pay for each year an employee has worked, often capped at 26 or 52 weeks, is becoming less standard as tough times roll on.

Severance plans are being customized based on level of responsibility, according to a 2007 survey by WorldatWork, an association of HR professionals. One level applies to CEOs, another to senior executives, yet another to the rest of the staff.

Moreover, a new study by Right Management, a jobs counseling firm, finds that U.S. severance packages are the lowest in the world. You read that right. The study discovered that top U.S. executives earned as little as 2.76 weeks of severance per year of service compared with an average 3.39 weeks per year of service for 27 other countries. (Visit WorldatWork.org; search for "severance." Also visit Right.com; click on About, then on News Room, then on Press Releases.)

LAWYERING UP. Scared? Search out lawyers who are experienced in representing employees in severance issues. Search online for severance lawyers and also check with your local bar association. Ask for a free consultation before signing on for legal representation.