Basic Guide to Severance Pay

If you have recently been laid off or plan to leave a job in the near future, you may be wondering about severence pay and what it is exactly. While severance pay isn't something an employer has to provide, you may be able to cash in on this offer.

Severance pay is funds that your employer or former employer may offer you in case you leave their company. It usually consists of a week or two of pay, depending on how long you have been at the company.

Does Your Employer Have to Offer Severance Pay?

No company must offer any type of compensation package. This is at the sole discretion of each individual corporation and there are no laws saying that it has to be provided to an employee.

What Do These Packages Include?

A severance package typically includes monetary compensation. However, sometimes you may see other benefits offered such as extended insurance or benefits that you are accustomed to receiving through your current job situation. If you are fortunate enough to have a severance package included in your job description then it is important to find out what it consists of.

Under What Circumstances are Severance Packages Usually Given?

If the company you work for offers a severance package, it is usually given out at the time that employment ceases. Some employers may dissolve the severance package for matters such as the employee quitting or being fired. Since it is at their sole discretion, they can remove it for any reason or decide it is not valid unless a contract has been signed. Some companies may use a severance package to entice employees not to file a lawsuit in certain cases and in others, it can simply be an enticement to choose the employer instead of another job opportunity.