Why offer severance

A decision on severance involves comparing the compensation costs to the company benefits. Some employers worry about negative publicity that arises from mass layoffs and therefore offer severance packages to downsized employees. While you may not have a mass layoff as a small business owner, you might opt to close a business unit or store location.

Paying one month's severance or longer to workers can help deter some of the negative press that may come from local TV reporters and newspapers.

Some state laws do require that you pay severance after facility closings or mass layoffs, according to legal website NOLO. Your state's labor department can let you know about any severance laws. Severance pay is a sum of money or other benefits that an employer offers a worker who leaves the company under certain circumstances. You might receive severance pay if you are being laid off, your job is eliminated , or if you and your employer mutually agree to part ways.

The typical formula for a severance package is one or two weeks of pay for each year of service. It can be paid in one lump sum or over a period of time.

If paid all at once, it is important to understand the accompanying tax liability. While it may be more difficult to qualify for unemployment benefits if your severance is paid over a period of time, this payment structure has advantages, such as lowering your tax burden or allowing stock options to vest. In addition to pay, you can also negotiate other benefits, such as health insurance or employee placement services. In all instances, severance packages are negotiable. Delete Cancel.

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Get a demo. Here are seven ways your company can benefit from providing a severance package. A severance package can forestall lawsuits. A severance package can help protect your brand reputation. A severance package can improve workplace culture. A severance package can help you recruit and retain talent.

A severance package can help retain customers. A severance package can save money for your company. Previous Post. Next Post. Employee Benefits layoffs outplacement services severance package severance pay.

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