Recent volatility in the job market has caused many employers to
implement reductions in force and employee lay-off programs. In
order to reduce the economic consequences of an unanticipated job
loss and mitigate the negative employee relations issues that can
result from downsizing, many employers will offer those employees
who are involuntarily dismissed a severance package or separation
pay.
The primary benefit of severance pay is that the terminated
employee receives a portion of their salary for a specified period
of time. A common severance pay amount is two weeks of
compensation. For executives, it is common to pay the executive one
month of salary for each year the employee has worked for the
company. In some cases, such as with senior level executives, the
severance pay can exceed what the employee would have received in
salary had they remained at the company.
