Severance

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Severance

A settlement received after being released from a corporation. In the context of corporate governance, an agreement that assures high-level executives of their postions or some compensation and are not contingent upon a change in control.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Severance

A payment often (but not always) made in a lump sum that occurs when an employee is laid off or fired. Severance is sometime voluntary; that is, an employee may choose to quit and take a severance that is offered instead of staying and risking a layoff with no severance. The amount of severance is determined by the employee's length of time at the company, previous pay rate, and other factors. Accepting a severance makes one ineligible to collect unemployment insurance or to initiate a wrongful termination lawsuit. A severance exists in order to reduce the risk of the company when layoffs become necessary and to improve employee morale.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
First, you may be overdue for a review of the design of your severance benefits.
Suppose an executive severance pay plan provides a severance benefit of 1 1/2 years' salary, payable over a 2-year period.
For Meyers at Radisys, a termination within 18 months of a COC means the severance benefit increases from 12 to 24 months' salary.
The court rejected the argument that requiring additional consideration in support of a valid waiver of ADEA claims would force employers to stop offering special severance benefits to employees in protected categories.
Here he reviews deferred compensation from taxable subsidiaries, enhanced tax-qualified plans, severance benefits, and consulting contracts-additional options that may be available depending on the situation of the individual executive.
Eligible full-time and part-time associates who are laid off due to the store closing will be offered severance benefits.
In July, ArkansasBusiness.com reported that Joe Courtright, president and CEO of USA Drug, said in an email to employees that "it is possible that decisions will be made about job reductions and store closings" and that the company would give advance notice and provide severance benefits.
The company said it is willing to discuss severance benefits for the employees, he said.
getting help from the state through the Trade Adjustment Assistance Act office; the company is providing severance benefits to some, Ms.
She and [Vice President Jill] Mackie said the company and union plan to meet to discuss severance benefits," the paper reported.
Sabhlok signed a release of claims to qualify for Kellogg's fortified severance benefits. While Sabhlok worked for a year on various special projects, Kellogg officials allegedly gave him repeated assurances that they would find him a permanent position, but no jobs were found.
However, the bottom line is if a company pays severance benefits (not including paid vacation or sick time) to former employees under a reduction-in-force plan (contract, employee handbook or other agreed-upon company action contemplating a reduction in force), those payments generally qualify as SUCBs and are not subject to Social Security, Medicare and unemployment taxes.