What is severance pay?

There are several situations in which an employee is left without his job. It can happen due to the fact that the employed decided to lay him off or to dissolve his position in the company; if the employee leaves the company as a result of a mutual agreement with the manager; or in case the employee leaves the company due to other reasons. In these cases, the employee will not walk away empty handed, the employer providing compensation for the effort and performances of the employee within the company. This compensation is the severance pay, which represents a certain amount of money received by the employee the moment he parts with the company. There are companies that offer severance packages, which may include health insurance and assistance for outplacement, helping the employee find a position in another company.

Companies are not obliged to offer severance pay to their employees, so this may differ from company to company. Still, if the company does provide it, you should be able to find about it before getting employed, as it is mentioned in the employment contract. Also, companies will offer severance pay only under certain conditions, so even if you have it mentioned in your employment contract, it doesn't mean that when you will leave the company you will be entitled to receive this type of pay. Thus, you need to make sure that you understand the conditions in which the company does offer severance pay to its employees, as this is not something easily given. Even if you lose your job because the company is letting people go and not because you underperformed, you may still not be considered eligible to receive severance pay. This happens because each company has its own specific policies, which may state various conditions for these cases.

But, the Worker Adjustment and Training Notification, shortly known as the WARN act, provides employees a degree of protection when it comes to severance pay. So, if the company that hired you provides severance pay, it may be worth knowing these details. For instance, in the case of a company that has more than 100 employees and is about to lay off a significant number of people, the law requires the company to notify you if you are going to lose your job. More precisely, the company has to issue a 60-day notification concerning such an aspect, announcing the closure of a department or even of the company, if the case. If you don't receive the notice within this time frame or you're not notified at all, you are indeed entitled to receiving severance pay from your company.

Still, you can also receive it if you alone have been fired without notice, without the company being in the stage of firing several employees at once, although the severance pay is discretionary in this case. There are employers that will offer severance pay in case the company is looking to lay off one person, in return of not getting sued by the person for things like unpaid wages, discrimination, and wrongful termination. You may also get severance pay in case the company goes through restructuring processes, deciding to dissolve your position, or lying you off due to budgetary issues, cases in which you become unemployed due to these particular changes and not because you performed badly when employed. In these situations, the company may decide to provide severance pay, as a way to say thank you for your services and to apologize for the caused inconveniences.

How much money can an employee get through severance pay? Well, there isn't a specific sum that is mentioned as being suitable when it comes to severance pay. The amount of money provided as compensation may vary a lot, depending on the job and industry. To this aspect, it is added the period in which someone has been employed as well. In many cases, companies offer 1 or 2 weeks of salary for every year a person spends occupying a particular position. But, it is worth knowing that severance pay can be negotiated. Depending on the circumstances that led to your departure from the company, the numbers that were initially stated in the description of the severance pay may be different from the final sum that is negotiated.

What kind of factors can help you in negotiating your severance pay? To start with, the period in which you've worked for the company counts a lot. If you've been employed for several years in a row, occupying a particular position, then you can definitely use this as an argument. Of course, the position you had within the company and your rank will also have something to say during negotiations. And it also counts if there was something mentioned about severance in your employment contract. So if you want to negotiate this particular part, you'd better come up with good arguments using the previously mentioned aspects.

While in most cases severance pay means a sum of money, it is not the only way to be compensated when leaving a company. If you think that health insurance is more valuable to you, you can request to have this kind of insurance for several months after leaving the company, as a form of severance pay. Or you can keep the equipment you've been using at the office, like a laptop or desktop, once it has been completely cleaned of all the company's data. Still, you should know that laid-off or fired employees won't have too much negotiating power, but it is worth trying if the odds are in your favor.

The main idea is to know the details of severance pay of the company that is about to hire you, so you won't have a surprise later on during your activity in the company. Also, if you got to the point where the company offers you severance pay and are close to signing the agreement, be very careful what you are signing, because you may end up letting go some of your rights or benefits without being aware of it. Not all companies play fair and square and may try to give you less by using various tricks and artifices