Is Severance Pay Common?

Severance Pay Common

Unless a specific contract stipulates that an employee must receive severance pay, companies typically decide to offer it only when they lay off employees or fire someone. Depending on the company, a severance package could include compensation and extended benefits like salary continuation, payment of unused vacation or sick time and outplacement services to help the former employee find another job. In addition, some companies provide a lump-sum payout instead of offering the money over a period of time.

Severance packages are often based on the length of service at a company and the level of the position. The amount can be a significant sum of money that may make it possible for an outgoing employee to remain financially stable until finding a new job. Some states also require that employers pay out unused vacation and holiday leave as part of the severance package.

While severance pay packages can be a significant benefit for outgoing employees, they also carry with them many legal implications that can have a negative impact on the company. For example, severance agreements frequently stipulate that the former employee cannot sue the employer for any reason. Moreover, a severance agreement may contain confidentiality and non-compete clauses that prevent the former employee from working with a competitor for a certain period of time.

Is Severance Pay Common?

Employers who choose to offer severance packages often set forth their policies in the employee handbook. The details of the package are then open to negotiation. Generally, the larger the company is and the more resources it has, the greater the severance package will be. The reason an employer fires someone is also a significant factor. For instance, a fired executive for reasons other than a general layoff would likely not receive a severance package since the company will be unable to rely on their reputation or professional relationships for future business.

In the case of a severance package, it is crucial to review all documents carefully. It is particularly important to determine whether the company is requiring that you sign a non-compete or confidentiality agreement as part of the package, which you will need to be prepared to negotiate. If you have any questions or concerns about the severance agreement, you should consider consulting an experienced attorney about the terms before agreeing to them. A lawyer can help you navigate the severance package process, sidestep potential mistakes and protect your rights.

This is particularly important when considering whether to accept a severance package or pursue legal action against your former employer. A lawyer can also provide you with information on prevailing state law regarding severance agreements and how to best negotiate the terms of the document. A severance pay lawyer can also assist you in reviewing termination letters and any other documentation provided by the company. They can advise you on how to proceed, including when to reject the severance package and what to do about unpaid wages. The severance pay lawyer can also assist with wage garnishment and other issues that can arise when a company terminates your employment.