When Do You Offer Severance Pay

Generally, a severance package is pay and benefits an employee receives when he leaves employment at a company. The package may include the following:

• The employees remaining regular pay
• An additional payment based on months of service
• Payment for unused vacation or sick leave
• A payment in lieu of a required notice period
• Medical, dental or life insurance – Some employers offer a continuation of insurance benefits but they would not foot the paying of the bills
• Retirement benefits
• Stock options
• Unemployment benefits – Fired employees can claim unemployment benefits if they were fired for reasons other than serious misconduct.

When Do You Offer Severance Pay
Employers are not legally required to give severance pay to fired employees. However, they may do so only under two circumstances:

• Some states require employers to give a small severance pay when they close down a facility or laying off a large number of employees
• An employer is legally required to give severance pay if workers are led to believe they would be paid when they leave employment. This is evidenced by:
 A written contract stating the severance would be paid
 A promise that employees will receive severance pay
 A history of the company giving severance pay to other employees in the same position
 An oral promise to the employees that severance will be paid

Some employers routinely give severance packages to long-serving employees who were fired for reasons other than serious misconduct, as a way of softening the blows of being laid-off.

In making an offer for severance package, the employer should consider the following reasons:
• Give the employee something in exchange for the release – This means that you are giving the employee a package of benefits in exchange for not bothering you with lawsuits.
• Be clear about the rights the employee is waiving
• Give the employee plenty of time to decide and sign
• Avoid any hint of coercion
• Give preferential treatment for older workers – Workers aged 40 and above must be given more time in deciding.

Severance Package as Goodwill to Employees

Many companies offer severance package as a sign of goodwill to former employees. A good severance package says a great deal about the humanity of a business manager. It may be designed in such a way that the size and the financial capacity of a business company are also considered. The severance package need not be elaborate; it just has to be an honest gesture on the part of the employer.

Having a good severance package to offer a departing employee creates a lasting impression of understanding and goodwill.