Severance are benefits
that an employer grants an employee when he/she leaves
employment at the company. Severance pay is
usually granted to employees who are laid off or retire.
However, increasingly it is being offered to employees
who are fired or resign from their jobs.
Many
firms that pay severance offer two weeks pay. Others pay
two weeks plus one week for each year of service the
employee has given to the company. Still others are
considerably more generous, particularly to employees
who held senior positions. In this case, six months’ to
a year’s pay is not atypical and is predicated on the
assumption that a senior-level employee will have a more
difficult time obtaining a new and equal job than will
an entry-level employee. |
When
you fire an employee, even if he or she has only been
with you for ninety days or less, you should pay
severance. It decreases your risk of a lawsuit.
You should
have a severance
pay Policy and it should be consistent.
If you continually change your severance policies, you
are only adding to your legal risks.
You
should only pay severance, however, if the employee
agrees to sign a document that forfeits their right to
sue you for wrongful termination. Don’t be cheap in this
lion’s pit of potential danger. Have a lawyer draw up
the release document so that it is, as much as possible,
bullet proof. You should give the employee twenty-four
hours to review, sign, and return the document to you,
otherwise it may not hold up in court should the
employee decide to sue you anyway. If the employee is
age forty or over you must, by law, grant the person
twenty-one days to review such a document.
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