How Does the Termination Process Impact Severance Pay?

Termination Process Impact Severance Pay

A key part of the termination process involves discussing post-termination payments and benefits, such as severance pay. Whether you’re planning to be terminated or being let go, understanding your severance package will make the transition easier for both parties.

Severance pay is money that your employer pays to you as you leave a job, oftentimes in exchange for signing a non-compete or confidentiality agreement. Typically, severance packages also include other payments such as vacation and sick days, and sometimes even stock options.

In the United States, there are no federal laws mandating that employers offer severance packages or how much they must offer, though it is common for them to do so. Employers must honor any severance pay provisions in an employment contract or collective bargaining agreement, and some companies have company policies that stipulate a certain amount of severance pay for any employee who is laid off, says an attorney with the law firm Clark Law Group.

How Does the Termination Process Impact Severance Pay?

Generally, people who rank higher in the hierarchy of their positions are more likely to be offered severance pay, according to a survey by careers development services company Randstad RiseSmart. Additionally, if your employer restructures or downsizes a department, you may be offered severance pay Ontario even if your departure was not the result of your actions.

However, your employer may be able to deny you or reduce your severance package if they can prove that you were fired for cause (poor job performance, attendance issues or misconduct). You should review your employment contracts and company policy for details about the conditions under which you’re eligible for a severance package.

The type of severance package you receive depends on many factors, including your industry and the job market. If you’re leaving a highly specialized field, for example, it may be more difficult to find another position that offers the same wages and benefits, which could lead to financial strain and a lengthy period of unemployment. Likewise, if your former employer was contributing to your retirement account, accepting a severance package could stunt your retirement savings.

Your severance package is typically calculated as one week of pay for every year you’ve worked, though the Employment Standards Act sets out minimum entitlements based on length of service. In addition, your employer must provide you with contractual notice or payment in lieu of notice if they’re terminating you without cause, and this can affect how much severance pay you’re entitled to receive.

While severance packages are often helpful, they don’t necessarily make the transition smooth for both sides. You may feel pressured to sign your severance package right away, but it’s important to take the time to review it and think about what you want to do next. It’s also a good idea to consult with an employment lawyer before making a decision to avoid any future legal complications.

It’s not uncommon for employees to be shocked by the amount of severance pay they’re receiving, especially when they weren’t expecting it. However, it’s worth remembering that severance pay is taxed, so you should factor that into your calculation of the total value of your package.