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Severance Pay
Definition
Severance pay is compensation provided by an employer to an employee who is laid off or terminated, typically based on length of service.
Explanation
Severance packages typically provide one to two weeks of pay per year of service, sometimes including continued health insurance and outplacement services. Severance is not legally required for most employees but is often included in employment contracts or offered as a goodwill gesture.
When negotiating severance, consider asking for extended benefits, career counseling, and a neutral reference in addition to cash compensation.
Example
An employee with 10 years of service receiving 2 weeks of severance per year gets 20 weeks of pay, plus 3 months of continued health insurance.