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  • Writer's pictureDavid Manes

Severance Pay: Dispelling the Myths Surrounding It

The hallowed ground that is known as severance pay. An employer fires you, but to ease the burden they pay you six months salary and send you on a comfortable path to your next job.  This sounds like a beautiful thing, and for some people it is as easy as that. But for the vast majority of workers that is  not the reality of severance pay. Several myths about severance pay still float around out there. We are here to dispel a few of them so that you can have a more realistic expectation of what to expect if you lose your job.

Myth: Employers must provide severance pay to employees they terminate

Lawyers talking in the courthouse

Reality: It is entirely up to the employer of whether or not they want to offer severance pay

There are no federal laws requiring companies to pay severance and there are virtually no state laws requiring the same. It may make good business sense for an employer to do that, he boosts his reputation as an employer who takes care of his workers and leaves a door open for re-employment. However, the companies are not legally required to pay severance.

A legal duty to pay severance can arise if the employer promises to pay it and then does not. If they do this it will usually be in the form of a written contract or even a verbal promise. A history of severance pay or the inclusion of severance pay in the employee handbook can also make it incumbent upon the employer to pay. However, in order to enforce these actions an employee will almost assuredly need the help of a lawyer, so you will have to weigh the cost of the lawyer against the cost of the severance package you are trying to obtain.

Myth: The usual severance pay is one month’s salary for every year of service

Reality: There is no usual severance pay

Some companies may offer several weeks of severance pay, some may only offer one month of severance pay. The packages vary according to the employer, geographic location and the industry norms. Do not have any expectations and if you are going to ask for a severance package. Make it reasonable and make sure it is in writing, but do not have any unrealistic expectations.

man and woman looking at papers

Myth: Everyone who gets severance pay has to sign a release

Reality: The employers may require this, but law does not

An employer may want you to sign an agreement where you release or waive any claim of liability that you may have against them in exchange for accepting the severance package. You can negotiate this point, but the employer may not budge. They may require that you not make bad comments about the company and seal your lips for all eternity. It may still be worth it for you to sign the agreement and take the severance, but think about it long and hard and contact an attorney if you are unclear about what the agreement entails.

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