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Severance Packages

What To Expect in a Severance Package


business man carrying box of belongings from office

Are you entitled to severance pay when you leave your job?

Bruce Laurance/Stockbyte/Getty Images

Have you been offered a severance package? How do you know if the package is reasonable? How is severance pay calculated? Can you negotiate a better deal?

Marikay Jung, Recruiting and HR Professional, shares information on what's typically covered in a company's written severance policy, typical severance payments and when you may be able to negotiate a severance package.

Companies That Offer Severance Packages

It's reported that approximately 60% of business have formal severance plans.

Written Company Severance Policies Address

1. Purpose of the severance plan is to provide assistance to employees while they seek other employment.

2. The circumstances under which severance will be paid -- i.e., involuntary terminations, group reductions in force, etc.

3. The circumstances under which severance will NOT be paid -- i.e., involuntary terminations for cause, etc.,

4. Define the specific groups covered by the policy -- i.e., all hourly, non-exempt, exempt, executive, etc.

5. How severance will be calculated and will the calculation apply to all covered employees or will the calculation differ by work group. -- i.e., # weeks x (times) years of continuous service.

6. How severance will be paid -- i.e., via regular pay periods for the specified duration or in a lump sum.

7. What if any, documents must be signed by the terminating employee -- i.e., a legal release, Hold Harmless Agreement, etc.,

8. Whether or not health care benefits will be provided for the duration of the severance period.

9. Specify that the company has the exclusive right to amend or terminate the severance policy.

10. In the event that the company is sold, merged, etc. severance will not be paid unless an employee is involuntarily terminated.

Other items that may be covered: payment of accrued and accruing vacation, eligibility for outplacement benefits, etc.

Typical Severance Pay Benefits

If severance payments are not specified in the current collective bargaining agreement, a company is under no obligation to provide severance benefits to employees represented by a labor union. When negotiated, a typical severance benefit for an hourly (union represented) employee is one (1) week of pay for each year of service to a maximum of 26 weeks.

Typical salaried (non-union) severance benefit is two (2) weeks pay for each year of service -- to a maximum of 26 weeks.

Typical executive severance benefit will be in the 6 to 12 months range.

Negotiating Severance

If the involuntary termination is part of a group reduction in force, it is most unlikely that an employee would be able to negotiate a different severance arrangement.

If the involuntary termination is an isolated event -- i.e., a "mutual agreement" termination, -- depending upon the grade-level of the employee and the surrounding circumstances, there may be some "wiggle room" to negotiate, but typically, not much.

The private web sites, and the information linked to both on and from this site, are opinion and information. While I have made every effort to link accurate and complete information, I cannot guarantee it is correct. Please seek legal assistance, or assistance from State, Federal, or International governmental resources to make certain your legal interpretation and decisions are correct. This information is not legal advice and is for guidance only.

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