Severance Pay


Severance Pay
The compensation that an employer provides to an employee who has been laid off, whose job has been eliminated, who through mutual agreement has decided to leave the company, or who has parted ways with the company for other reasons. Typically, severance pay amounts to a week or two of pay for every year that the employee was with the company. Executives may receive a month's pay for each year of service and senior executives generally receive severance pay as outlined in the employment contract. In addition to pay, severance packages can include extended benefits, such as health insurance and outplacement assistance to help the employee secure a new position.

Not all companies provide severance pay to employees upon termination and those that do may not provide severance pay to all employees. Severance pay is typically issued on a case-by-case basis and as dictated by any employment contracts in place during hiring. No law requires employers to provide severance pay; however, the Fair Labor Standards Act (FLSA) mandates that an employer must pay the employee whose employment has been terminated through their last day of work and any vacation time that the employee has accrued. If severance pay is received, any unemployment compensation to which the individual is entitled will be accordingly reduced.


Investment dictionary. . 2012.

Look at other dictionaries:

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  • severance pay — ☆ severance pay n. extra pay given to employees who are dismissed through no fault of their own, usually based on length of time employed …   English World dictionary

  • severance pay — ► NOUN ▪ money paid to an employee on the early termination of a contract …   English terms dictionary

  • severance pay — noun Money paid as compensation to someone whose employment is ended. The only case for severance pay on top is that fortunes in public life are so uncertain that some MPs might be discouraged from seeking office if there weren’t any cushion. Syn …   Wiktionary

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  • severance pay —    Money, often the equivalent of one or two months salary, that is offered by employers to employees who are laid off. Severance pay is not a legal requirement, but it must be paid if it was offered in a contract. The term also sometimes refers… …   Business law dictionary

  • severance pay — išeitinė išmoka darbuotojui statusas Aprobuotas sritis buhalterinė apskaita ir finansinė atskaitomybė apibrėžtis Išmoka darbuotojui, viešojo sektoriaus subjekto mokama nutraukus darbo santykius ar tarnybą darbdavio arba darbuotojo iniciatyva,… …   Lithuanian dictionary (lietuvių žodynas)

  • severance pay — also separation pay Payment by an employer to employee beyond his wages on termination of his employment. Such pay represents a form of compensation for the termination of the employment relation, for reasons other than the displaced employee s… …   Black's law dictionary


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