Severance Pay

What is Severance Pay?

Severance Pay is the additional compensation provided by the employer to the employee after employment is over. This is optional, not mandatory. This includes extended benefits such as outplacement assistance help, health insurance, etc. This package is offered to employees whose jobs are eliminated because of inflation or who are laid off or who retire. In some cases, employees who are fired or resign may get this package.

Severance pay can be a goodwill gesture and ensures a smooth transition for employees and employers. This can help employees with the buffer between working and unemployment.

The amount of severance pay depends on how long the employee was with the employer. In some companies, there is a lump sum amount that is taxable as well. However, based on this factor severance pay is given:

• Medical Benefits Or Life Insurance
• Extra Pay Based On Time Of Employment
• Pay For Unused Vacation Time, Sick Leaves, Or holidays Pay
• Stock Options And Retirement Accounts

Also, See: Fixed Pay | Incentive Pay