A Newly Unemployed Person’s Guide to Severance Pay

Unemployed Person’s Guide to Severance Pay

When a company announces a layoff, it’s often expected that the workers who get let go will receive severance pay. However, the rules around this compensation — also known as gap pay or bridge salary — aren’t always clear and may vary by state. For this reason, it’s important to know how much your severance package is worth.

The amount of severance pay an employee gets is typically calculated by the number of years the person has worked at the company, Kluger says. For example, he says, it might be one week of pay for every year up to and including 10 years of service. Some companies, he adds, might offer more than that, but this will depend on the industry and the position and rank of the job.

In addition to the base pay, severance packages can include other benefits such as salary continuation, bonus payments and the use of company equipment such as laptop computers. Some states, such as California, allow workers to keep their performance bonuses that aren’t part of their base pay when they leave a job. However, this isn’t the case in all states and employers aren’t required to give such bonuses to employees who’re terminated for a reason other than misconduct.

A Newly Unemployed Person’s Guide to Severance Pay

Another thing to consider is whether the severance package has any impact on unemployment benefits. In some states, a lump sum severance payment will reduce an employee’s eligibility for unemployment while a paycheck-based severance pay calculator won’t. But this isn’t the case everywhere and it’s important to check with your state’s unemployment office for guidance on this issue.

While it’s true that companies aren’t legally required to pay people who are laid off or fired, many do so in an effort to defuse hard feelings and help their former employees find new jobs quickly. It’s also a way to avoid legal trouble. As the economy continues to struggle, more and more companies are laying off employees or offering them severance packages to smooth the transition to a new job. Those who are being laid off may have been at the company for a long time, were in an executive or management role or may have had significant responsibilities that can be difficult to replace.

While severance packages are generally monetary and delivered in a lump sum, they can also be in the form of additional perks such as outplacement services or career coaching. And Kluger says that “never assume that what your employer offers in a severance package is set in stone.” That old adage about everything being negotiable applies here, he says, and it’s never a bad idea to ask for more. For instance, he says, a worker might point out that their spouse has just been laid off and they need more money to make ends meet or that they have recent expenses to cover, such as a home equity line of credit.

Leave a Reply

Your email address will not be published. Required fields are marked *