Can Severance Pay Be Included

Employers often offer severance pay as a form of compensation when employees are laid off, let go or terminated. This is a goodwill gesture on the part of the employer and may also help defuse any hard feelings that may be associated with a job loss. Severance packages can include benefits that may help a departing employee find a new job, such as outplacement services or even health insurance coverage. However, these benefits may be contingent upon the signatory agreeing to a non-compete or non-disparagement clause. Such provisions, if worded improperly or in violation of state and federal laws, could be considered illegal and infringe on an employee’s rights. A reputable New York severance pay lawyer can assist in reviewing such contracts to determine if they are valid or not.

Typically, severance pay is a lump sum amount that includes an employee’s final paycheck. It may also include the company’s payment of any unused vacation, sick or holiday days that accrued during the course of employment. It might also include commissions that have not been paid, as well as any other unpaid bonuses or expenses. Severance pay may be based on the length of time that an employee worked for the company, as well as their position within the organization.

Many employers have policies in place that detail how severance pay is calculated and when it is offered to departing employees. This information is generally available in an employee handbook or an individual’s employment contract. Companies are generally not legally required to provide severance pay, but they can include such benefits as a way of showing appreciation for an employee’s work or for mitigating any hard feelings that might be created due to their termination.

Can Severance Pay Be Included in Employee Benefits Packages?

Some companies may also include in a severance package the payout of retirement funds, such as 401(k) or profit-sharing plans, or a pension plan. This can be a substantial sum and may be paid in a single lump sum or through regular installments. Depending on the specifics of the plan, an employee can choose to leave money in their current account or roll it over into an Individual Retirement Account (IRA) or into a new employer’s pension plan.

In addition to the above-mentioned items, other common items that may be included in a severance package are outplacement services, letter of reference or letters of recommendation and the transfer of any unused sick or vacation days. If the company provides a group health plan, they may include COBRA continuation coverage, which allows former employees to retain their coverage for a period of 18 to 36 months. It is important for a departing employee to understand what they are being offered and to negotiate a fair package. For example, an employee who is being laid off may wish to insist that any severance pay lawyer be accompanied by a full written list of all the company’s responsibilities, including their obligations under the law.