Glossary > Employment Law > Workplace Safety > General

Severance Pay

Severance pay is a sum of money that an employer may offer to an employee upon termination of their employment. It is typically provided as a financial cushion to help the employee transition between jobs and cover expenses during the job search period.

Example #1

An employee is laid off due to company downsizing and is offered a severance package that includes several weeks of pay based on their years of service.

Example #2

An employee voluntarily resigns, and as part of their departure agreement, the employer offers them a lump sum payment equivalent to a few months' salary.

Misuse

Misuse of severance pay can occur when employers use it as a way to prevent employees from exercising their legal rights, such as filing discrimination complaints or reporting illegal activities in the workplace. In such cases, employers may offer severance pay in exchange for the employee signing away their right to take legal action against the company.

Benefits

Severance pay can provide employees with financial support during a period of uncertainty and help them bridge the gap between jobs. It can also include benefits like extended health coverage, outplacement services, and assistance with job search efforts.

Conclusion

Ensuring that severance pay is offered fairly and transparently is crucial to protect employees during times of transition. It should not be used to undermine employee rights or coerce them into waiving their legal protections. Providing adequate severance benefits can contribute to a more equitable and compassionate work environment.

Last Modified: 4/30/2024