Although there is no legal requirement to offer severance, many companies provide it to employees after their employment is terminated. In general, severance pay is based on length of employment. You may decide to offer a week's pay for every year of service, or a flat amount based on six weeks' pay. When provided, it's given either as a lump sum or paid over a number of weeks.
Often included is a continuation of benefits coverage, especially health insurance.
If you'd like some yardstick to measure your ideas against others' practices, take a look at this:
What's included in formal severance pay policies?
Also, be sure to let your employees know that if they receive income from a severance package, they may not be eligible to immediately receive unemployment benefits. Severance packages are also subject to income tax.
Finally, keep in mind that severance packages are not limited to money. Indeed, it may make sense for both the company and the employee to offer other items:
Research if severance is commonly included in employment contracts in your industry. Give us a call if you'd like some additional insights into assembling a severance policy.
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