It's really strange to me that companies in the US can just determine how much severance they're "willing" to pay. Why is it even up to them?
It seems that much of HN has very little knowledge of (and interest in) business operations and employment law in other countries.
I see your question as genuinely inquiring about this stark difference from what is common in Europe and other countries.
Here is my take on the situation:
Let's say I own a widget factory and you are highly skilled at turning paper clips into widgets. We agree on a price for your time and I hire you to start making widgets. Things are going gangbusters, you produce a ton of widgets and I pay you for the time you spend working for me. All of a sudden people stop buying widgets. I no longer need your services so I have you stop coming in and stop paying you for your time.
I don't understand why I should be obligated to pay you for services you didn't provide. It's not like I can go to my customers and ask them to pay me for widgets I didn't sell them.
Most people (who don't own things like factories) need a regular, predictable, stable income to survive, and finding new employment is not always easy.
Therefore, people in most developed countries have agreed that by taking on an employee, it is contingent on the employer to provide some guarantee of stability. This is borne out by laws restricting firing in many cases, and requiring severance pay in the event.
The USA is an aberration in this regard - even the workers seem to value the rights of the employers far above the rights of the employees. I'm not sure why this is.
To paraphrase a famous quote, in the USA the workers don't see themselves as workers, but as temporarily down-on-their-luck owners.
By Ronald Wright.
It's funny how it started out as a criticism of people who think that the government should have more control of how businesses operate, but has been paraphrased so many times that it's now used as a way to criticise people who want to minimize government involvement in business.
It's hilarious applying it here, given the situation described was reversed. Your position is that the worker who doesn't own the factory should dictate what the factory owner should pay because of a power imbalance.
Weird.
Perhaps the issue is having difficulty telling the difference between workers and factory owners in general.
It also helps make it easy for entrepreneurs to start companies and create jobs in the US and is a direct reason why we don't see the same innovation in regulation-heavy regions.
If you're talking about why we don't see more visible commercial innovation from European countries then it's more about access to the enormous amounts of capital to build a big name startup like Uber etc.
Nobody notices the legions of small bootstrapped or seed to profitable software businesses across the EU.
I would think that since innovation and growth (caused by innovative use of resources or increase in efficiency or novel products and services) in general should be relative to the population and its state to begin with, nominal GDP growth per annum would be a reasonable metric as a proxy for the wildly non-measurable "innovation in terms of GDP"; for reference, here's the data for 2018:
USA: 2.9% Canada: 1.9%
Sweden: 2.2% Norway: 1.3% Finland: 1.7% Denmark: 2.4%
Germany: 1.5% France: 1.7%
Ireland: 8.2% (not a typo, likely explained by expansion of business services from NA into EU) UK: 1.4%
Portugal: 2.4% Italy: 0.8% Greece: 1.9% Spain: 2.4%
Germany is at 3.4% of GDP spending on R&D and the USA at 2.8% France is also right up there at 2.2%
I'm going with the OECD definition here: https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm
Pivotal products are a better milestone than vague estimates of R&D spending.
Tesla sales are a fraction of any of the big three in terms of sales or revenue.
They sold 192,000 vehicles in the US in 2019. Each of the Big Three sold well over three million.
Tesla currently loses $2500 on every vehicle they sell
People always seem to compare Tesla technology of tomorrow with what its competitors are doing right now. That's why Volvo "only" has level 3 self-driving, while Tesla has a fleet of robotaxis that are earning you money on its ride-sharing app while you sleep.
I joke, but a large portion of the Tesla fan base has no clue what is going on in the autonomous driving or auto manufacturer world outside of Tesla. Tesla has been a big innovator, but they aren't leaders in everything....not even close.
The thread is about innovation, so that's what counts. And what other manufacturer matches what Tesla has driving on the roads today? The closest realistic challenger is the expensive Porsche Taycan which is still missing all the functionality and usability features.
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Little known German company ZF has almost double the revenue of Tesla. They also make the transmission for the Porsche Taycan EV that's outselling the 911.
Tesla has sub-1% market share in the global auto market and rapidly declining energy product deployment (they deployed 4x more MW 4 years ago than the did last year). Let's not pretend Tesla has taken over anything yet.
German companies with more revenue than Amazon: Volkswagen, Daimler, BMW, Allianz, Siemens, Deutsche Telekom, Uniper, Bosch.
On the smaller end, Germany also has a comparable number of employer firms per capita as the U.S.
Empirically it largely is a myth that worker protection and consumer protection stiffles enterprises or innovation.
Valuation reflects market sentiment and potential but perhaps I should have left it out. The real focus is the "world-changing" aspect of the products produced.
What have been the recent global innovations produced by those German companies? Anything turned into a household name?
That's why they're called a "hidden champion".
We've had gyroscopes for a century. The iPhone is innovative because it used that to implement a new device that changed mobile computing.
I'm actually not quite sure what you mean with the "global innovations" part, though, could you expand on that? What is it that makes e.g. Microsoft innovative?
What I see is the your big four all sell consumer product/ services and thus are more visible. E.G. Bosch is developing electric powertrain components, produces radar/lidar and video sensors for autonomous driving. Bosch also produces the robots used in those mostly-automated factories.
1. https://www.sciencedaily.com/releases/2008/12/081217192745.h...
But really? The thing most preventing you from starting a factory today is... because you can't find the land? Alright then.
Finding and controlling land to expand your business is not a serious limiting issue. You have effectively infinite headroom before you need to worry that you can't own a factory on Earth because too many other factories already exist.
Seriously? Should they eat cake as well?
The ability to hire and fire fast is undeniably helpful for companies, and being able to quit and move to new jobs is just as useful for personal career development. It might not be for everyone, but it's not any less valid.
Adding more regulations will bring equivalent trade-offs because that's the reality of economics. Do you disagree?
If you want to get bogged down in technicalities and anecdotes though, then sure life isn't fair. I worked manual labor before and now own multiple properties. I guess it's just magic.
There are outliers, but we’re talking about broad systemic patterns.
You evidently went to an okay UC - you probably had supportive parents. Be it emotional or financial support. Perhaps both! Perhaps your family life was reasonably stable. Perhaps you had three square meals most of your youth.
The point is that you are in a position to access capital that is markedly different from a lot of individuals born into lower socioeconomics striations in society and the statistics are weighed :heavily: against them.
This is often through no fault of their own.
Thank your lucky stars the world aligned for you as it did. Where and with whom you started that life made a far bigger difference than any perceived grit you might think you exercised.
I guess eventually owning a factory is just impossible right?
Getting loans is hard, especially if you're one of the working poor. Starting a company that doesn't die after a few years is harder. When you're one of the 40% of Americans who can't cover an unexpected $400 expense, if you company fails you're fucked. The social safety net in the US is a joke.
I was simply stating that truth, not defending it nor saying other realities can't exist. But there is always a trade-off. What part of that is so controversial?
Perhaps things have changed and the balance needs to be shifted now. That's a great discussion to have, but let's actually have a discussion then.
But yes, different places are different and life isn't fair. No need to cutoff any discussion of various economic systems and environments for the same basic retorts.
https://youtu.be/xXze8_SzW28?t=431 <---Granted he's got Youtuber money and other gun-sales related money to help, but the concept is the same....he's bootstrapping a factory after purchasing the relevant capital infrastructure using his own money.
This is the difference. Most Americans don't have access to this capital, or access to means of borrowing this capital, and if they do have the means then they might not necessarily be able to shoulder the risk.
It's not for everyone. Sure, most people have no appetite for the level of risk involved even if they can scrape together the money to buy some revenue-generating asset (I know a guy who left the Marine Corps as a truck driver...moved back to Japan, bought a truck, and then opened a moving company). Most people don't have access to capital....nor will most people ever have the intellect to write tight software code, no matter how many government-backed Code Bootcamp Initiatives there are.
To bring this back to the original point though, telling someone to bootstrap a factory, which is demonstrably doable in the American economy even today (for flexible definitions of "factory"), shouldn't ever be a "controversial" piece of advice. Especially on an pro-entrepreneurship site like YC/HN.
That the other side of the coin is misery for those, who have not the means to exercise these freedoms, that is the problem your comments ignore.
There is always theoretical freedom and practical (real) freedom. It is not evident, that the USA offers more freedom to the average person.
Whether you (can) take advantage is completely orthogonal to the original question of why the USA is "an aberration in this regard", and I would rather not devolve into yet another rehash about fairness and opportunity.
in europe at least that part is gone, you start your own company not out of necessity but out of motivation.
America just chooses more freedom than government mandated security. There's some slight trade-off but it is nowhere near as problematic as media makes it seem.
VCs might be interested in your app but not in a random bakery which is also a business of a type that is probably more common.
Also VCs take a share which makes them the owner as well but oh well.
There are 10s of millions of business owners in America. Ask any of them how they did it.
Is getting hired in Germany more difficult, compared to the USA? And if so, can you attribute that to employee benefits?
You guys act like there's no downside to cradle-to-grave nannying of the labor force. There is.
There is nothing more to gain here, have a good day.
I could claim that the historic position of the USA after WW2 caused all of these. My claim would be as baseless as yours. A good starting point for research, but nothing more.
If I shoot someone and they fall down dead, is "b....b....but correlation isn't causation!" a valid defense?
For me, it is quit natural to assume that a base level of employee protection causes innovation. And Germany would be a good example, as there are quit some innovative small to medium sized companies. The only thing lacking is tech unicorns and there are all sorts of reasons for this.
Like, if you are a PM at FAANG you can probably get a seed round for any kind of nonsense in SF, but in Germany you would need far more proof and preferably revenue (I don't know Germany that well, but it's similar across much of Western Europe).
VC's tend to be look a person in the eye and judge his (almost always) character. They don't like travelling, so most of their investments are made in the Bay Area.
Coupled to this, there's much more availability of angel funding because of the previous unicorns (paypal, eBay, Google, Facebook et al) so it's easier to get started.
There are definitely some cultural issues at play also, but fundamentally the reason that the US has such a high proportion of tech giants (which seems to be what you're focusing on) is the low cost of capital caused by the dollar's exorbitant privilege.
Note that it's per capita, and Israel has a population of 8mn, versus the US's 330mn.
I think it's pretty clear that most VC funding is given in the USA.
And note that the terms are often much better, and funding is accessible earlier. This article explicity states that you want to get seed funding in the US if you want to maximise your valuation. See: https://medium.com/sosv-accelerator-vc/what-does-seed-fundin...
These regulations provide for worker rights, productions and consumption safety, product quality and much more. Something America is lacking in completely.
You also have a government and department of defense that helps a lot of your big multinationals grow and kill it's foreign competitors.
You can look at the acquisition of Alstom by General Eletric as a good example.
And what you call fluid employment I call bad jobs.
I guess that explains why people do whatever they can to migrate from the US to your country.
They do that, right?
You want to balance the power? Make it easier to be an employer, not hinder it.
Swedish worker unions sees the success of the business as success of the employees and will help get there for example by fair to both sides collective agreements.
This means for example that unreasonable demands from employees will be blocked, and if the employer needs to cut down employees cannot refuse.
Why not, for instance, make the loss of a job be covered by saved union funds that are generated by the union as a whole? The only reason the business is tagged as the responsible party in Europe is historical cruft.
No one has a right to payment if they do not provide services.
The main difference, of course, is that in countries that require this sort of thing, it's required - but requiring certain implicit terms in employment contracts is a regular thing in the U.S. as well - there's all kinds of regulations and case law on what sorts of employment contracts are valid. Saying that something like severance is a necessary requirement is a difference of degree, not of kind.
I do think there are a few places where this policy breaks down. For example, the additional transaction cost makes hiring decisions "stickier." I think this hurts the employee as well as the employer.
I don't quite understand the power imbalance here. My employer requires my labor and I am willing to trade my labor for money. If I'm not happy with the arrangement I'm free to find someone else to trade with.
There's only a power imbalance if workers are prevented from organizing, or if they (for whatever reason) refuse to organize. Or if they workers are very easily replaceable.
Obviously, if you're one of 200 workers, you can't negotiate evenly with the ownership as 1/200th of the company's workforce. Same goes if you're an unskilled worker who is easy to replace. However, even then, if you organize with all 200 of your co-workers, you are closer to a balance in negotiating power since it would be hard for said company to replace all 200 workers at once.
You make it sound like employers are all fat rich people smoking cigars while everyone else is in a sweatshop. The reality is that 99% of businesses are very small in size (as in, one owner and very few employees) and it's often much more a partnership than the power imbalance you are talking about. Yet the same laws apply whether you deal with a 10 persons company of a 100000 persons one.
Either way I'd expect fewer americans still work at large businesses than at small and mid-sized businesses combined.
And "small businesses" with fewer than 500 employees represent 99.7% of all businesses and yet they represent less than half the total workforce.
Also, it's not because a company is small that the owners are small time business people. The owners might be independently wealthy.
Being an entrepreneur means getting things done with what you have. You don't need to be wealth and instantly go from 0 to 1000 employees. Most people start with modest means and build up from there.
So not only do most Americans do work for multinational companies (53%) but on top of that, 80,5% of the ones working in SMEs are themselves the owners and don't have any employees to speak of.
Which leaves a whopping 19.5% of American SMEs which actually employ workers.
So you're dead wrong.
cf: https://www.sba.gov/sites/default/files/advocacy/2018-Small-...
But I agree, people act like the economy is nothing but fortune 500 megacorps and push for laws that make it harder for everyone to survive except for such businesses and their employees.
And people always miss the hidden cost, even when talking about the fatcats. If you require companies to provide a year of severance, then everyone just gets paid (n-1)/n as much on average, where n is the average number of years an employee is expected to stay.
Why is it a good idea?
Employees less likely to leave without notice.
Employees stay longer because the safety net grows.
Less likely to speak poorly about you after leaving
More secure in their job. More emotional invested.
What are your reasons for not? Even if google stops selling at home they will keep the server alive for a grace period.
I had a friend who ran a bitcoin market. When the market shutdown he was responsible for customer records for 7 years and had to pay a company to secure access in case of requests.
But they are no reason to legally require severance pay.
Voluntary severance payment and contractually agreed ones are fine, if people want those.
I live in the UK. Here the obligation is symmetric. All my recent work has been on 90 day terms. That is, if either I or the employer wish the contract to end normally that requires 90 days of notice unless both parties agree otherwise.
My most recent employer decided their costs were too high compared to projected income, so they gave me 90 days notice back in 2019.
At that point I knew that in 90 days I won't have a job. I could start looking for a new job, able to tell any prospective employer that I can start on day D+90. I would still get paid, as usual, and my employer was entitled to insist that I continue to work as usual.
In fact of course they gave me garden leave, I guess that's probably an alien term in the US too? Garden leave means that the 90 day term still applies, you still work for them not anybody else, and they still pay you fully - but your employer thinks it would be best (for example because they're scared you will sabotage things, poach customers, or steal trade secrets) that you do not come to the office or use their computers and thus you cannot do your job.
I'm very awkward so I pointed out that they're short of cash, rather than having too many engineers, and so since I wasn't doing anything else I kept working, although I will admit I wasn't exactly the most motivated team member since I knew I was terminated. They had to go re-enable my git access, AWS access and so on, which had been severed when I went in to be told I was fired. Very amusing.
Now, let's roll back to my previous job. I'd been essentially head-hunted, I informed that employer that I'd be leaving, triggering the 90 day notice. I was actually at their offices at the time, (I usually work from home) and I informed them that I'd be available until close-of-play to negotiate the exact details. They got right down to the wire but eventually sent someone to work it out, and we agreed I would spend the notice period spinning up people who'd been brought in to learn what I do, and that I wouldn't take my vacation days, but I would actually leave on D+85 not D+90.
Paying out a notice period is very different from severance pay. I can assure you that AirBnB does not have a 14 weeks notice period.
(American companies also pay you out the notice period, and some send you on gardening leave, if they want you out of the office. But notice periods in America seem to be generally shorter, like 14 days, for most more junior jobs. In the UK one month seems to be more standard?)
Most contracts with a notice period still allow the company to just pay it out and send you home on the spot.
You even have a contract when you are buying a piece of candy at the newsstand.
(At least in the common law world. In eg German law technically you have one contract for the piece of candy, and one contract for each individual coin you are handing over. See https://en.wikipedia.org/wiki/Abstraction_principle_(law) Germans are a bit crazy.)
> At-will employment is a term used in U.S. labor law for contractual relationships [...]
Emphasis on contractual.
Or am I missing something?
A contract that can be dissolved at will is still a contract. Just like you can cancel your Netflix subscription at will, and it's still a valid legal contract.
You may have bought raw materials, hired people, set up a warehouse and stocked it with products anticipating my orders, but I don't understand why I should be obligated to pay for your products if I no longer need them.
All contracts generally include terms for termination of the contract. The tone of indignation is in the US, employers determine them unilaterally and employees don't have the bargaining power to do anything about it.
Employment law in Europe, for example, frequently requires the severance terms to be determined at the time the employee is signed up. The employment agreement is a contract, and will be signed by all positions in the firm. In many cases, the severance terms are based on law.
Among other differences, for example, a German President is personally liable for the financial obligations of their company. If the company goes bankrupt, so does he.
In US new enterprise have a very high failure rate, how do entrepreneurs survive in such environment?
A CEO (and other company execs) can be held personally liable only if there is fraud or other illegal acts. Mismanaging a company, or even simply working hard and not succeeding, are not illegal.
American firms can take on much more risk, so we tend to see both many more failures and many more successes.
I would imagine if a director breaks the law, only then he could be personally liable. And in that case I would imagine Germany does have higher standards than US.
"If the company is in crisis special obligations arise for a managing director the breach of which may lead to a personal liability of the managing director."
I'm not saying you are wrong, just that Germany doesn't really support your point.
Not really. Directors are not generally held liable for debts incurred by their companies in Germany. However, they can be held liable if they are found to be in breach of their duties as directors. Also, the onus of proof is reversed in some cases (e.g. the director needs to prove he wasn't in breach of his duty).
the UK is one week's pay for every year, but with a maximum of £538/week and a maximum of 20 years for length service.
given that a software engineer who's been at AirBnB for two years is going to get 16 weeks of pay and probably makes _at least_ 180k/year, they're probably getting around $55k.
This compensation does not sound "vastly more generous", but not bad for those that were less than 5 years employed.
So yes, when you collect the deferred salary it feels generous. But you were getting less salary up until that point in order to make the system solvent.
One may well prefer this arrangement, but one can't evaluate the generosity of the payment without also accounting for the cost that made it possible.
The baseline is decently middle class with a solid safety net but there's a lot more room at the top than you're making out IMHO.
As always, to make cash as a "working" dev you have to get as close as you can to a gigantic money funnel of some sort. The main difference from the U.S. is that there are fewer and different money fountains, especially missing unicorn and VC money. Finance, FAANG outposts and doing specialised things for huge real-economy companies still pay well.
The safety net argument has no legs. Australia and Canada both have social benefits that far exceed the majority of EU nations, yet pre-pandemic there was no shortage of $150k+ dev roles.
Zurich is.
> And I have colleagues who make £450k+
Just as there are American devs pocketing 7 figures annually. Again, the number of European devs making >$100k is a fraction of a percent. You can be making $100k in the US after a 6 month bootcamp or in AU/CA with a couple of years experience.
I doubt that $100k is the 99th percentile for London developers, maybe it is for European in general.
I promise you, the market for developers does not top out at anywhere near $100k.
That's closer to a starting salary (assuming a university degree).
Mainly worked with high traffic Ruby apps but also done production C and Rust. Side interests in VMs and compilers.
These positions exist if you're good, experienced and most of all, not a complete asshole.
London finance attracts a crowd that I had very little in common with. To be honest I only interviewed to see what it was like. It wasn't for me.
Which country do you live in? Is it common practice for all employees to have severance negotiated as part of an employment contract? What happens if the employee decides to leave the employer before the contract expires?
Because it's set by the government, it caps out at well below a typical tech worker's burn rate, so it's little more than a brake on the depletion of our savings. When a tech company offers severance it's typically much, much more than what the government guarantees.
You also get the full amount regardless of how long you're unemployed, so e.g. if you get laid off with 7 weeks severance and find another job in 3 weeks, that's a free month of salary.
In our case, the payout is defined as 4-12 weeks of salary (plus 1-4 weeks notice), based on length of tenure. Since this scales with what people earn, there's little need for tech companies (or other well-paid fields) to offer anything extra.
On a related note, Australians are also entitled to 4 weeks paid leave per yer, which accrues if not taken. Employers are also required to pay out any leave balance (even if the employee leave voluntarily), which means most workers will have at least a couple of additional weeks paid out on top of the severance.
It's the same here, in that you get the full amount regardless of how long you're unemployed after they let you go.
https://www.finder.com.au/unemployment-cover
No idea how common it is, though.
Some examples:
- somebody who makes 5000 euro gross per month who's 20 years with the same company would get ~15 months severance.
- somebody who makes 3000 euro gross who's 5 years at a company would get 7 months of severance.
Interestingly enough, the age of the employee is a factor of the equation!
When it's the employee who decides to leave the company, the company can require them to stay on for many months, again depending on how long the employee was with the company. Or the company can agree to release earlier, but it will still be on the hook for a significant amount of months of salary.
Let's just say that the decision to hire an engineer isn't done lightly.
Benefits vary greatly. It has been awhile since I worked with this stuff, but IIRC Massachusetts is the highest payout ($750+) and places like Alabama, Florida, Mississippi and Arizona are <$300.
Severance is usually part of an employee contract (if one exists) or commonly part of an agreement at separation where the employer gets some benefit (waiving the right to sue, etc).
We can see from the priorities how workers have been left out of the decision making for decades in the US.
Just like, for example, there's no legal requirement to pay employees bonuses, so bonus pay is at the employer's sole discretion. In fact, salary itself is at the employer's sole discretion other than complying with minimum wage and overtime laws.
It's been my experience that severance for rank-and-file employees is rarely offered and is very miniscule if it is paid.
Grow fast and flame out? That’s ok. Shut it down as gracefully as possible and try again.
Severance pay is voluntary. So of course they can decide how much they want to pay.
You spelled weeks wrong.