A severance agreement is a type of employment contract that explains how an employee will be compensated at the time dismissal, layoff, or termination of employment.
Severance agreements sometimes apply to employees who quit or retire from their jobs as well. The main purpose of a severance agreement is to provide a degree of financial security for employees who are faced with job loss.
The amount employees are compensated by a severance agreement varies greatly. At times, severance pay compensates a worker with one or two weeks’ salary. In other cases, a severance package provides a recently terminated employee with as much as a year’s salary. Because severance agreement terms can vary so widely, it is critical that you understand the specific terms of any severance agreement to which you are a party.
Under most circumstances, employees are not guaranteed severance pay. If a severance agreement is included in an employment contract or company policy, however, then the employee may be entitled to severance pay, provided that all of the agreement’s conditions are met. For example, it may include a requirement that an employee work for the company for a specified period of time before receiving severance pay. Understanding the precise terms of your severance agreement will give you the security of knowing your legal rights and obligations, including when, how much, and under what conditions you can expect to collect after termination.
Severance agreements can come about at any stage of employment, whether at hiring, during the course of employment, or even at the end. Having a clear severance agreement in place prior to termination, however, is critical to enforcing your rights to pay.
Severance pay is an important reassurance for most workers. Not only does it help a recently terminated employee deal with financial challenges, but it also provides peace of mind for workers who are still employed. If you need help understanding your severance agreement, are unsure as to whether you are entitled to severance pay, or believe that you have been unfairly denied severance pay, legal help is available. An experienced employment attorney can help you understand, negotiate, or enforce a severance agreement to protect your legal rights.