| When employees leave, whether they resign or | | | | employers. Today, it's common for executives to |
| are terminated, you are under no legal obligation | | | | include severance (sometimes called a golden |
| to provide anything in the way of wages or | | | | parachute) in their employment contract. |
| benefits beyond paying them for the time they | | | | Severance compensation may include cash (paid in |
| actually worked. Even so, you might want to | | | | a lump sum or over time), continued benefits, and |
| consider offering some sort of compensation, or | | | | even stock purchase arrangements. |
| severance, to departing employees. An attractive | | | | In putting together a severance policy, begin by |
| severance policy can benefit your company in | | | | taking a look at your marketplace. Are other |
| two key ways. | | | | companies offering severance packages? If so, |
| First, it can aid in hiring and retention. A severance | | | | make yours competitive. If not, consider putting |
| policy that offers, for example, one week's salary | | | | those benefit dollars elsewhere. Then think about |
| for each year of service to employees who leave | | | | what you want to accomplish with your policy--do |
| may be viewed as an attractive benefit. Certainly | | | | you want a benefit to attract new employees, a |
| you can exempt employees who are terminated | | | | program that promotes longevity, a tool to |
| for cause. You may also include other restrictions, | | | | discourage workers from going to competing |
| such as disqualifying an employee from receiving | | | | companies, or a device that reduces the chance |
| severance if he goes to work for a competitor, | | | | of employment-related litigation? |
| discloses trade secrets or confidential information, | | | | Your severance policy may be a standard |
| or starts a competing business. | | | | package that every employee receives, or it may |
| Second, it can be used as a tool to obtain a | | | | be negotiated individually based on specific |
| release or waiver of claim. For example, you may | | | | circumstances. Depending on how it is set up, it |
| offer a severance payment on the condition that | | | | may come under ERISA (Employee Retirement |
| the employee agrees not to sue you for any real | | | | Income Security Act), and if so, you will need to |
| or alleged employment practices violations. | | | | be sure it meets federal requirements. Before |
| Certainly departing employees do not have to sign | | | | you implement any general severance policy or a |
| such an agreement, but if they don't, you don't | | | | particular agreement, have an attorney review it |
| have to pay the severance. | | | | to be sure it meets any applicable statutes and is |
| The concept of severance evolved from | | | | not discriminatory. |
| negotiations between labor organizations and | | | | |