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Understanding severance packages

In certain lines of work, during the hiring process employees and employers may come to an agreement or understanding regarding the process in the event of an untimely employment termination. If an employer gives an employee compensation following a termination, this is called severance. There are many reasons why an employer may offer a severance package to an outgoing employee.

Most common among these considerations is for an employer to protect themselves from claims against them in the event of a termination. Factors usually included in a severance package may include a pay structure based on the time of employment, the circumstances that led the employee's termination or even the condition of the employers, such as bankruptcy.

In addition to an extension of a salary beyond the date of the employee's termination, severance packages may include an extension of health insurance benefits or even the inclusion of a pension, or the continued contributions of an employer to the employee.

The specifics of employment law with regards to a severance agreement may be complicated. With so many factors potentially under consideration, such as claims by the employee about wrongful termination, harassment or even discrimination or whistleblower factors, it is important to understand your employment contract or specifics within an employee handbook so that you are not surprised or caught off guard with unmet expectations in the event of an employment termination. Understanding your severance package is also important to make certain that you obtain all the benefits and conditions discussed and included in the severance package.

Source:, "Severance Packages: Are Benefits, Severance Pay on the Table?" Accessed on Jan. 12, 2016

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