In today's ever-changing economy, it is often difficult for employees to be certain about their job security. Any number of factors could lead to a company folding, moving, merging or downsizing. And when this occurs, employees are inevitably let go. Many full-time employees are given employee benefits, including health insurance and pension packages available upon retirement. Another benefit given to many employees, which may be available in the event of an employee termination, is severance compensation.
Severance agreements, typically called severance packages, are neither guaranteed nor required, but are often given to full-time employees who are laid off. Factors that may determine the terms of the severance package include the length of employment with the company, the reason for the employee's terminatation (layoffs, downsizing, employee misconduct, etc.) and the financial status of the employer.
When offering a severance package to a recently terminated employee, a business also will typically include terms for their own protections, as well. These provisions may include an agreement that the employee will not sue the company for wrongful termination or other legal claims related to the company or the termination.
If an employee feels that his or her job may be in jeopardy, it may be wise to learn the company's policies concerning employee benefits, including a possible severance package. Even if a severance package is not currently among an employee's listed benefits, one could still be negotiated while employed. It may be in the employee's best interest to see the guidance of a legal representative familiar with employee rights to develop a severance package proposal to protect the employee in the event of a termination.
Source: FindLaw, "Severance Packages: Are Benefits, Severance Pay on the Table?", accessed March 31, 2015