Will I Receive Severance Pay If I Am Laid Off?

When you are laid off from a job, you want to be sure that your final pay includes all the benefits to which you are entitled. Severance pay, which is money paid in addition to your salary or wages, accrued vacation, and other benefits, is not required by federal law, but a few states, such as Maine, have laws that require severance pay when plants are closed. Otherwise, severance pay is generally at the discretion of the employer.

Employers provide severance pay in order to help departing employees, to keep up the morale of remaining employees, and to avoid lawsuits.

How is severance pay determined?

The amount of severance pay to which you may be entitled depends on your employer's plan. Conditions vary widely and depend on the size of the employer, with larger companies generally offering more formalized severance packages, and whether the employer is in the public or private sector.

Length of employment

Severance pay is often based on your length of employment with the company. For example, you may be entitled to one or two weeks of severance pay for each year you have worked for the company, perhaps with a cap at a certain number of years.

Level in the organization

Whether or not you are entitled to severance pay and how much you will be paid may also depend on your level in the organization. According to an article in allbusiness.com, executives may get anywhere from six months to one year of severance pay, management-level employees could get from three to six months, and non-management employees may get up to 12 weeks or pay, or may not be entitled to severance pay.

Cause of termination

The cause of termination of your employment can also affect your severance pay. If you are terminated for cause, you would generally not receive severance pay. But if you are laid off due to the closing of a plant or operation, or a general staff reduction, you may be entitled to severance pay.