As a New York employer, you offer terminated employees severance packages. To avoid legal disputes with former employees, do you know what compliance and legal matters to tend to in your packages?
To help, see what the Society for Human Resource Management advises on creating proper severance pay plans. Take care of terminated employees while following the latest regulations.
Currently, federal laws do not hold sway over severance pay for terminated workers, but that does not always apply to state law in some locations. You may have an obligation to offer specific terminated employees severance pay, so double-check local regulations. For instance, if you lay off a large number of employees, or if you shut down a plant, state law may require you to offer severance pay to all affected employees.
Remain consistent with severance pay, regardless of an employee’s age, race, gender, disability, family status or ethnicity. This includes employee privileges, terms, compensation and conditions that apply to severance packages. This does not mean you must pay every terminated employee the same severance amount. Instead, you may determine package amount according to a person’s job role and how long the individual worked with your company.
Taxation of benefits and compensation
Research the Internal Revenue Code to determine whether your packages meet the IRC’s deferred compensation requirements. If you do not meet the latest requirements, terminated employees who receive a severance package may pay more in interest charges and penalties on their taxes. That said, your severance benefits packages may qualify for an exemption.
Avoid violating employment law while creating and administering severance pay packages. Staying informed about the latest regulations and standards keeps you out of legal trouble.