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Severence Pay Package Guide for Employers


What is Severance Package?

Severance package is a set of pay and benefits for an employee before leaving a certain position in a company. This kind of special payment and compensation is granted to employees after signing a severance agreement with their employers. The amount of payment will depend on the length of service of the employee in the company. Some of the additional payments included in severance package are the payments for unused paid leaves and benefits. Sometimes, continued benefits like life and health insurance become negotiable depending on the policies of the employer for its terminated or former employees.

Outplacement Assistance

There are some companies that offer severance package with outplacement assistance. What does outplacement assistance mean? This is a form of special assistance of the former employer to the separated employee in finding a new job. All of the necessary conditions and policies related to this kind of payment or benefit for terminated and retired employees must be properly indicated in the company’s severance package policies. Why is it important to include the policies for severance package in the employee’s handbook? This is to make sure that the rights of employees will never be neglected by the employer just in case a force termination or separation in the company was imposed.


Severance packages are also negotiable depending on the situation. Not all companies are required to offer this kind of compensation to their employees especially if the reason for the force separation is financial trouble. Accepting a severance package will make an unauthorized employee to file a complaint against a former employer. Also, this kind of payment or compensation may affect the records of the former employee and there’s a possibility that it will affect the capacity of the terminated individual to find a new job. So, it is better to consult a lawyer first and read the content of a severance agreement before signing it to avoid major problems in the end.

Support the Newly Unemployed

Severance package was designed to support the newly unemployed. This kind of benefit is actually being offered to those employees who resigned in a particular company for a certain reason or when an employee was subjected to termination caused by a violation of the company’s rules and regulation. This kind of compensation comes in several types and classifications. It is commonly being used by the companies operating in United States, Canada and Puerto Rico. In Canada, severance package is offered only for those employees who were terminated after 12 months of service. The minimum severance package pay for Canadian workers is equivalent to five days’ payment and an additional two days’ payment will be added in every 12 months of service. Individuals who applied for pension plans before being subjected to termination cannot avail this compensation in Canada.

In America, severance package is something that is very special for all employees. With the use of this benefit, employers in America can already convince their former employee not to serve in the companies of their competitors. The terminated or retired person becomes more satisfied with its benefits until such time that the remaining unemployment compensation was already forgotten. In Puerto Rico, this kind of compensation is only for the terminated employees, but still it can be waived by the employer in “just cause” cases where the problem is the quality and productivity of the employee.

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