What are severance packages anyway? Severance packages provide for compensation and other benefits that employees receive upon leaving a company in exchange for obligations imposed by the employer. These obligations usually include waiving all employment-related claims, agreeing not to sue the employer, and to keep all private company information confidential.
Employees in this situation, usually executives or other management employees, receive this pay because of company policy or an employment contract that requires severance. Read on to learn more about severance pay and why some companies provide it.
What is Severance Pay and What Does It Do?
As noted above, companies provide severance packages when employees lose their jobs. These packages usually come with an agreement to waive all employment related legal claims and not to sue the company for such claims.
Some of the restrictions that may also apply include:
- Confidentiality regarding company secrets
- Agreements not to say or write anything negative about the company
- Never applying to the company again
- Non-compete agreements
- Returning all company property
The length of time worked for the company and seniority level often determine the amount of severance pay. In addition, some employees may have an employment contract which stipulates the pay amount.
An example of one typical pay rate is two weeks for every year employed. The terms are often negotiable and might include continued health benefits, vacation time payout, and outplacement assistance.
When you accept a severance package, you must adhere to the terms or possibly face monetary penalties that include returning the severance pay. Understanding all the terms is essential before signing your agreement.
Many of these agreements are lengthy and complex. You might forfeit your rights with little reward if you’re not careful. As such, employees often benefit by discussing their severance package with an employment attorney.
Why Do Businesses Offer Severance Packages?
Companies have reasons for offering severance packages that often benefit the company. Here are a few of the most common:
- Companies can find better talent for the open position because severance pay makes it easier for the outgoing employee to move on and the company to make a clean break.
- These packages often include agreements not to share confidential information, allowing companies to guard their secrets.
- Companies can use these agreements to make employees waive all employment-related claims, including unpaid wages and discrimination claims.
Reasons You Should Seek Assistance Before Agreeing to Severance Pay
Severance negotiations are always a possibility that employees should consider. It’s all too easy for people undergoing a difficult time to sign something they don’t understand.
Your salary and benefits are important, especially if you have nothing else lined up. If you’re going to waive your employment rights, you at least deserve to know the severance amount you’re receiving and the obligations your severance package places on you.
In accepting a severance package, you generally forfeit all your future rights to sue for employment claims. You’ll need to consider whether the severance pay amount and any continued benefits sufficiently compensates you for waiving your employment-related claims.
You’ll need to make sure you understand how to comply with your agreement’s terms. One violation that seems of little consequence could result in your losing all the benefits.
For example, mentioning something negative about the company on social media could violate a non-disparagement clause. You’ll want to make sure you fully understand your severance agreement before you sign anything.
Getting Help If You Have Any Questions About Severance Packages
Severance pay issues are among the many reasons employees contact lawyers for help. Many companies will freely violate wage and other employment laws, and then escape liability when employees sign severance packages worth far less than their unpaid wages claims.
Regardless of whether you’re having trouble understanding the terms of your agreement or feel it’s inadequate, help is available. Rowdy Meeks Legal Group LLC routinely reviews severance packages and negotiates better severance pay for employees.
If you feel that it’s time to get help with your severance pay issues, we are willing to help every step of the way. Contact us today about any concerns you have about severance packages.