A severance package is pay and benefits that employees may be entitled to receive when they leave employment at a company unwilfully. In addition to their remaining regular pay, it may include some of the following:
- Any additional payment based on months of service
- Payment for unused accrued PTO vacation time, holiday pay or sick leave unless the employee is picked up by the new buyer wherein all benefits become the responsibility of the new employer.
- COBRA insurance, or healthcare benefits through a certain period of time.
- A payment in lieu of a required notice period.
- Retirement accounts
- Stock options
- Commission payments
- Assistance in searching for new work, such as access to employment services or help in producing a résumé.
Packages are most typically offered for employees who are laid off or retire. Severance pay was instituted to help protect the newly unemployed. Sometimes, they may be offered for those who either resign, regardless of the circumstances, or are fired. Policies for severance packages are often found in a company's employee handbook. Severance contracts often stipulate that employees will not sue the employer for wrongful dismissal or attempt to collect on unemployment benefits, and that if they do so, they must return the severance money.
