A severance package is compensation given to an employee when they are terminated from their job. For instance, an executive may be let go from the leadership group at a tech startup. But as a severance, they are given the next six months of pay. This gives them time to search for a new job without feeling the stress of not having an income.
So, if you get fired from your job, does this mean you deserve a severance? Do all workers have a right to this type of compensation, or is it relatively unique?
No legal requirement
Legally speaking, severance packages are not required. Most employees will not get one. They are typically just used for executives and other high-level professionals. In fact, the severance package itself may be detailed in the employment contract that the executive signs. But most low-level employees are at-will workers, so they don’t have employment contracts or severance packages.
Why would your employer offer one?
There are many reasons why employers will give out these severance packages. Often, it’s a way to be competitive. When hiring employees, they have a better chance of hiring top talent if those employees know that they have such a safety net. The employee hopes not to be fired, but they know that they have already been promised additional compensation if that happens, making the job more attractive than an offer from a competitor.
If you have been terminated and you have an employment contract that you feel hasn’t been followed correctly, it’s crucial that you understand all of your legal options.