Severance Pay

Severance Pay

A portion of an employee's salary paid upon the employee?s departure from the company. This may occur if the employee quits, is laid off, or, in some circumstances, is terminated. Generally speaking, severance pay is between two weeks' and a month's worth of salary for each year the employee worked at the company. In addition, severance pay often includes extended coverage for health insurance, vacation pay, and/or other employee benefits. In the United States, no law requires severance to be paid, but many employers offer it as a perk. In order to qualify as severance, the payment must explicitly be offered to supplement unemployment insurance. See also: Golden handshake, Voluntary redundancy.