Companies have various reasons for relieving or terminating their employees. These reasons may include a looming redundancy or a planned payroll decrease. In such cases, employees can get severance pay from their employers as compensation. Terminated or laid-off workers typically receive this payment if their companies offer it.
Aside from the reasons stated above, employers may offer severance packages to workers if new measures or company mergers will affect their employment. Companies can also include these payments in their existing benefits packages.
If your company has relieved you from your position, you should understand how a severance package works. This article will help you learn more about getting this type of compensation from your employer.
How is Termination Pay Different from Severance Packages?
Termination pay and severance packages are distinct from each other. However, people often interchange these terms. Employees usually get termination pay from their former employers when they receive a termination notice. Employers may even give it to deceased workers or offer it to retiring employees. Companies may also state in an employment contract how much a worker can get after they leave.
Do Executives Get Higher Severance Pay than Other Workers?
Yes. Companies always give more to managers and executives in terms of severance pay. Relieved workers in lower positions get a week or two’s worth of this payment, but there are other employers who award executive severance packages within a year or more.
How do Companies Compute for Severance Pay?
Employers use different formulas for computing the total amount that goes into severance packages. Some companies will multiply an employee’s usual earnings by how long they’ve worked with them. There are even cases where workers receive an amount that’s less than their expected final payout. These situations will depend on how big their company is.
Are Severance Packages Covered by Tax?
Yes. An employee’s lump sum after getting laid off, relieved, or leaving their former employer serves as their income, which makes it taxable. But how is severance pay taxed? Salary deductions at the time of your departure will cover federal, state, and local taxes. Other taxes, such as Social Security tax and Medicare tax, are factored when taxing your final pay. Your final pay will dictate how much tax you will get.
How Long Does it Take to Get Severance Pay?
A terminated or laid-off employee can get severance pay from their former company on the week after their dismissal. Their employer may also give it to them on the next payroll period following their departure.
But before claiming your package, your previous employer might hand you a severance agreement. This form will not let you file a legal case against them once you sign it. They may even produce a non-compete clause, which forbids you from working with their competitors. An experienced lawyer will help you look over these documents for any loopholes or confusing language.
Companies may also give older workers a form for age discrimination claims before receiving their severance package. If they have any issues with their employment or pay, their former employer will let them nullify their release form. The employee must do so within a week.
How Much is a Severance Package?
Many industries offer different amounts of compensation to their laid-off or departed employees. But as we’ve mentioned before, a company can provide a former worker with one to two weeks of severance pay. This typical severance package will cover how long they have worked for the firm. Workers may also negotiate for a month’s worth of severance pay with their previous employer.
Simply put, your severance package will depend on your industry and tenure. It also does not have an exact amount since most employers do not offer them to their workers.
Hire a Top California Labor Law Attorney for Your Severance Package Claim
With your final pay and other benefits, a severance package will help you manage your future expenses after your company lets you go. But if you are not good at negotiating severance pay, seeking legal advice from a competent severance pay lawyer is your best option.
Hiring a Los Angeles severance package agreement attorney as your legal counsel gives you plenty of advantages. They will see if your employer will give you enough severance pay and help you in negotiating your package. And if you do not receive any compensation after your departure, a lawyer can help you file an actual lawsuit against your former company.
Mesriani Law Group’s team of highly experienced and competent employment law attorneys have represented countless plaintiffs throughout California. Our expertise in this field helps us ensure a successful outcome for each client. In fact, we’ve won over $100 million in total recovery amount for our clients. For a free consultation with our severance package lawyers, please contact our Los Angeles or Santa Monica offices.