Workplace Rights

Weekly (1/18/21)

Topic of the Week  Severance

If you've been terminated or permanently laid off from a long term job your employer may offer you severance pay, also called a separation package. Severance pay can include a lump sum payment, a period of continued paychecks, continuation of benefits or other forms of payment. Companies aren't required to offer severance pay, but those that do will have different sets of policies and guidelines for how severance is handled. 

1. What is severance pay?

Upon termination, especially when employees are terminated through no fault of their own and/or have worked for the employer for a considerable amount of time, some companies have a policy of giving the terminated employee severance pay.  Severance pay is not required by the Fair Labor Standards Act (FLSA); how and whether an employer chooses to grant severance pay is at its discretion.

Each employer is different. The employer’s personnel manual or policies may or may not have a written policy on severance. Or its policy may state that severance will be paid on a case-by-case basis.

2. Who is eligible to receive severance pay?

Although employers are not required to do so by law, many give severance pay to some or all permanently laid off or terminated employees. Employers who grant severance pay usually calculate it according to a set formula, based on the employee’s length of service. 

Even if your employer doesn’t offer severance pay, or you are not eligible based upon company policy, you can try to negotiate for more severance than the company offers, especially if you have been with the company for many years, have an excellent service record, or have provided unique services such as being a team leader or bringing in large clients to the company. Sometimes employees who have quit their jobs because of intolerable working conditions can also negotiate for more severance pay than would normally have been provided.

3. My employer wants to make a lump sum payment of my severance pay. How does that work?

A lump sum payment is a one-time payment in full of the amount of severance pay that you and your employer have agreed to. A lump sum payment gives you immediate funds to invest or use. If you receive a lump sum, your other fringe benefits will usually cease as of the date of the payment. A lump sum payment is taxable, and the employer may withhold at a higher rate than usual if it puts you in a higher tax bracket, so you may wish to consider deferring part of the payment until the next calendar year to avoid having a greater amount withheld.

Thought of the Week

"All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence."

–Martin Luther King, Jr.

Weekly Comic by Jerry King

Weekly Comic by Jerry King

Blog of the Week

Top Five News Headlines

    List of the Week

    from CBS News

    Financial relief for Americans

    Extend eviction and foreclosure moratoriums. To do this, Biden will call on the Centers for Disease Control and Prevention to re-implement and extend the already defunct moratorium until at least March 31. The new president will also call on the Departments of Agriculture, Housing and Urban Development, and Veterans Affairs to extend the foreclosure moratoriums for their federally backed mortgages. "These emergency measures are important," Mr. Biden's top economic adviser Brian Deese said on the call with reporters, "There are more than 11 million mortgages guaranteed by the VA, Department of Agriculture and HUD that would be extended."   

    Continue "pause" on student loan payments until September 30. The Biden advisers continue to assert Biden still supports his campaign pledge to cancel $10,000 of student loans, but this will take time as it has to go through Congress.  


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