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What Is Severance Pay?

Most employers are not required to provide severance pay to employees who are terminated or laid off.

A few states require employers who close a plant or lay off a large number of workers to provide salary or benefits continuation for a limited time, but most do not.

Nevertheless, many employers may offer one or two months’ salary to employees who are forced to leave their jobs through no fault of their own.

Some employers may be more generous to long-term employees by basing severance pay on the length of the employee’s service to the company; a typical formula is a week’s pay for every year of employment.

While no law requires severance pay, an employer may be legally obligated to give you severance pay if it promised to do so — for example, through:

  • a written contract stating that the employer will pay you severance
  • a promise of severance pay in an employee handbook or manual
  • a long history of the company’s paying severance to other employees in your position, or
  • an oral promise to pay you severance

A severance package can include more than just money. If you are in a position to negotiate a package (perhaps your termination is questionable and your employer wants to keep you from going to court), consider asking for these other benefits:

Insurance benefits: Health insurance continuation laws allow you to keep the same health care you had with your employer but may require you to pay the full cost of the premiums for continued coverage. However, nothing in these laws prevents your employer from picking up the tab if it agrees to do so as part of a severance package.

Uncontested unemployment compensation: Sometimes, employers will try to contest the unemployment claim of a terminated worker. Ask your employer to agree not to do so. It will make getting unemployment benefits a lot easier.

Outplacement services: Outplacement firms help employees find new jobs. They may offer counseling, job skills training, tips on résumé and cover letter writing, and leads on potential jobs. In addition, they may give you a place where you can use a computer, receive faxes, and have a receptionist take messages for you.

References: If you are leaving your job under less-than-pleasant circumstances, you might work with your employer to come up with a mutually agreeable letter of reference.

David Payab, Esq. from The Law Offices of Payab & Associates can be reached @ (818) 918-5522 or by visiting


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Why Choose Payab & Associates

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