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Definition

Severance Pay

Severance pay is a one-time separation payment when terminating an employee. Severance pay makes sense. It is humanitarian gesture, and good public relations. In addition, most managers expect employees to give them 1 or 2 weeks’ notice if they plan to quit, so it seems appropriate to provide severance pay when dismissing an employee. Reducing the chances of litigation from disgruntled former employees is another reason. Severance pay plans also help reassure employees who stay on after the employer downsizes its workforce that they’ll receive some financial help if they’re let go, too.


 

Severance Pay is a one-time payment some employers provide when terminating an employee.

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