What Severance Policies Should I Look For in my Severance Agreement?

  1. Severance Agreement
  2. What Severance Policies Should I Look For in my Severance Agreement?
severance agreement policies

Company Severance Policies

When a company has formal severance policies, it will include:

Purpose- The company will establish the purpose of the severance plan, which is generally to provide assistance to employees while they seek other employment.

Conditions for paying severance- A severance policy will also lay out under what circumstances an employee will be paid severance (e.g., involuntary termination, layoffs, etc.) and circumstances under which severance will not be paid (e.g., involuntary termination for cause, etc.).

Groups covered by the policy- Sometimes the company will limit the policy to certain classes of workers. For instance, salaried workers may receive severance but hourly employees will not.

How severance pay is calculated- The employer sets the policy regarding employees receiving a week’s salary for each year they were employed, or if another calculation ​will be used. The policy will also set guidelines for pay for such things as unused vacation time, sick days, personal days, etc.

How severance is paid- Employers can pay severance in a lump sum, or via regular pay periods for the specified duration. The payment method may affect the payout of unemployment benefits, depending on your state.

Documents to sign- A company may require employees to sign documents, such as a legal release, Hold Harmless Agreement, etc., before releasing severance pay.

Employer’s rights to modify an agreement- A company’s severance policy will likely offer some protection for the employer, giving them the exclusive right to amend or terminate the severance policy. Also, the severance policy may stipulate that in the event that the company is sold, acquired, merges, etc. severance will not be paid unless an employee is involuntarily terminated.

Negotiating Severance Pay

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.

Previous Post
What Should I Look for in My Employment Agreement?
Next Post
What Should I Do If I’m Wrongfully Terminated?