Severance Pay Policy
HR Policies & Procedures

Severance Pay Policy

Severance pay is extra compensation paid to employees as a result of their involuntary termination. It is paid in addition to any wages owed to employees for work performed and generally is not required by federal or state law. (However, a few states, such as Maine, require the payment of severance in the case of plant relocations or shutdowns. Employers should check applicable state law.) (See also: Retirement)
 
This policy discusses why employers pay severance, general releases, the legal requirement to pay severance, severance and ERISA.
 
Topics in this policy include:
 
· Why Employers Pay Severance
· Management Discretion
· Eligibility
· Refusal to Transfer
· Short-Term Layoffs
· Mergers and Acquisitions
· Use of a General Release
· Amount of Severance Pay
· Lump Sum vs. Periodic Payments
· Legal Requirement to Pay Severance
· Severance Pay Plans
· Entitlement to Severance Pay Under Contract Law
· Denial of Severance Pay as Age Discrimination
· Complete or Partial Sale of the Employer
· Requirement of a Release
· Severance Pay and Unemployment Compensation

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