Why Offer Severance Pay?
Slightly less than 50 percent of employers provide some amount of severance pay to workers whose employment is terminated. Except in those cases where an employment contract, union agreement, or a preexisting employer policy requires or provides for severance pay, there is no law or regulation requiring any company to offer severance. Employers voluntarily choose to provide severance to protect their goodwill with current, past, and future employees. These employers generally consider the severance pay to be a sort of voluntary, supplemental unemployment compensation. Employers recognize the reality that unemployment compensation, even in the most generous states, is usually far less than half a worker’s salary. Severance pay can alleviate some financial hardship in the short term. Employers also use severance pay to enforce a “release from liability,” or waiver from lawsuits, for improper or discriminatory termination. In most cases, an employer will require a departing employee to si
Related Questions
- Are unclassified employees covered by the Managerial Plan or Commissioners Plan eligible for severance pay if their positions are eliminated for budget reasons?
- Does Coldwater Creek pay a dividend or offer a direct investment program?
- Can one receive severance pay and receive unemployment at the same time?
