Components of a Severance Package
It is a fact that many employees rarely stays on only one job, they usually change jobs for various reasons. When an employee leaves work because of certain reasons that is when severance package negotiations come up.
Severance package is a benefit for an employee that is given when he/she leaves employment.
Possible reasons for an employee to leave work:
• Retirement
• Fired
• Laid off
• Resignation
There is no law that requires employers to provide severance pay in the United States.
Payment of severance to employees may be considered as voluntary.
These are some circumstances when an employer provides severance package to employees:
• The employees contract has a clause that requires the employer to provide a certain amount of severance pay
• Employers have already provided severance pay in the past to previous employees
• Promises of providing severance pay made in a company manual or handbook
Employers rarely offers severance package or sometimes called "golden parachute". Because almost all severance package offer includes a "release of claims", employers usually offer severance pay to employees if they are willing to sign a release, an agreement that is binding, intended to prevent the employee from filing any claims against the company perhaps the termination of the employee is somewhat questionable and the employer wants to prevent him/her from going to court).
In situations where severance pay is offered, the main concern of both parties (the employer and the employee) is to reach a more sensible severance package that is both adequate and possible.
Severance package negotiations usually include the following:
• Insurance benefits
There is no law that states that employers cannot pay health insurance even though the laws in insurance continuation allow an employee to keep the same health care with a former employer if he/she will pay the full expense of the premiums for continued coverage as long as the former agrees to pay as part of a severance package.
• Outplacement services
Outplacement firms aid employees in finding new jobs by offering the following services:
• Job skills training
• Leads on potential jobs
• Counseling
• Tips on creating resume and cover letter writing
• Uncontested unemployment compensation
Ask employers to agree not to contest the unemployment claim of a worker who is terminated to make it easier to get unemployment benefits.
• References
An employee may ask the employer create a suitable letter of reference.
• Stock options
• Additional payment
In addition to the remaining regular pay of an employee, he/she may ask their employers an additional payment based on their length of service.
Payment for unused sick leave or vacation time may also be included in a severance package.
To obtain a better severance package to an employer, the employee must start the negotiation before accepting a new job in another company or losing an employment because once an employee starts to work on his/her new job, raising the issue may be too late and the employer may not offer a reasonable severance package.
Severance package negotiations are complex issues and one should be prepared for everything. Many employees opt for what the company offers but better severance package may be obtained if negotiation takes place with a well-planned strategy.
To help you with issues regarding severance packages agreement, you can seek our expert legal services. You can visit our website to avail of our free case evaluation.
