Reynolds American Severance Package is Generous, According to Professor Sherry Jarrell

Reynolds American to cut U.S. workforce by 10%
Reposted from WGHP FOX 8 | by Brent Campbell

Reynolds American Inc. said Wednesday it plans to reduce its U.S. work force by about 10 percent by the end of 2014.

The move comes in an effort to save on labor costs and refocus its business, the tobacco company said in a business analysis released on Wednesday.

"Our business has always been driven, as is every business, by the size of our market place," said Maura Payne with Reynolds American. "In our case, the cigarette market has declined since 1982, yet the smokeless tobacco markets are growing."

Reynolds American said it expects to save $25 million by the end of this year. Those savings are expected to increase to about $70 million annually in 2015.

The company said job eliminations during that period will be partially offset by the hiring of new employees.

"The majority of the people that are leaving the company volunteered to do so, which is very good news," said Maura Payne with Reynolds American.

Dr. Sherry Jarrell, an economist at Wake Forest, said the company was generous with its severance package, which includes two weeks of pay for every year of service and early retirement options.

She also said the announcement isn’t all bad news.

"Their responsibility to us and the other 90 percent of people they will retain is to stay in business to sustain their profits and be able to move forward," Jarrell said.

Reynolds would not say exactly how many people were let go or how many voluntary severances they agreed to. It did say, however, that the expected cost of the workforce reduction will be about $110 million.