The Implication Of Severance Benefit On Employers And Employees

The Implication Of Severance Benefit On Employers And Employees

The employment scenario is quite unstable with people losing their jobs just as if it was about to happen. Dissociating from employment due to lay off, job elimination or mutually agreeing to part ways are some instances that can warrant severance pay. There might be other reasons too why employees have to part ways with their employer that could give a feeling of wrongful dismissal and also provides a solid ground for claiming severance pay. Regardless whether there was any dispute or not that led to the termination of employment, employment lawyers like Goldstein Lawyers can help the victim to claim severance packages by developing appropriate strategies for negotiating with employers and make them accept the package that benefits the affected employee.

A way for senior employees

Senior employees of organizations who are leaders in their own rights and drives business organizations from the front are most vulnerable to lose their jobs. To protect their interests, they negotiate hard with employers at the time of appointment and include a severance package in the employment contract that runs into thousands and even millions of dollars in some cases. By inserting the condition in the contract, it protects the interest of employees in two ways. Firstly, they remain financially protected in the event of losing the job. Secondly, the employers who have to shell out huge money on terminating the employee would not easily disturb the equilibrium which ensures job protection to some extent.

Calculating severance pay

Unless specifically negotiated, the formula for calculating severance pay amounts to employees receiving one- or two-week’s pay for every year of completed service with the employer.  While this is applicable for the regular employees, the amount can go up to even a month’s salary for each completed year of service if the employee is a Company executive. Depending on the circumstances and the company policy, for most regular and senior level employees there can be some outplacement assistance and extended benefits attached to the package.

No obligation for an employer

The US Department of Labor clarifies that it is not obligatory for employers to agree to severance packages because there is no such law. Only, if there is a mention about it in the employment contract that it becomes binding on the employer to clear the severance pay according to the agreed terms. Besides, if the employer makes a verbal commitment to provide severance pay to an employee, it is the responsibility of the company to uphold the promise.

Payment of severance pay

The severance payment can happen either as lump sum payment or the company can arrange to pay it on weekly, fortnightly or monthly basis for several months. In the latter case, the employee is still on the payroll of the company despite not going to work. In this condition, the employee cannot apply for unemployment.

Victims of wrongful dismissals not covered by severance packages can still obtain it by filing a lawsuit.  An experienced employment lawyer who find enough merit in the claim can help to resolve the issue in favor of the employee.