While employers are not required by law to provide wages or other benefits when they fire employees, most opt for severance pay. About two-thirds of U.S. employers have written severance pay policies, according to data from Lee Hecht Harrison, an outplacement services company. A key issue the employee wants to address is how the company responds to referral reviews or referral requests from potential new employers. The employee could request a section of the severance agreement that states: “The company acknowledges and accepts that the employee has done an admirable job with the company, and the company will make positive recommendations to all interested new employers of the employee. Alternatively, the employee could try to get positive letters of recommendation from supervisors, and the company could forward these letters to new employers who inquire about the employee`s past performance. In many cases, however, employers only confirm that the employee has worked in the company and has been in good standing. Severance pay is taxable, so be sure to set aside some of your severance pay for taxes. Most employers keep taxes on employees` paychecks, so you`ll need to adjust your budget once you stop working for them. Consider negotiating a higher amount to cover taxable income. Your employer must give you a “reasonable” period of time to review the terms of the singing agreement. If you do not feel safe about the conditions presented to you or if you feel pressured by your employer, do not sign the agreement. Take the time to review the conditions, and then ask your employer to sit down with you to discuss any issues you may have.
Severance pay can also help a company achieve its financial and business goals, Calli says. While some executives are reluctant to pay employees who aren`t working, it can save money in the long run, especially if offering severance benefits helps reduce the cost of unemployment insurance. In addition, in situations where employees know that a layoff is imminent, employers can use the promise of severance pay to encourage workers to stay as long as they need to, rather than seeing them leave in droves in search of new jobs. Although most people are employed at will, your employment relationship cannot be terminated without a legitimate reason if you are in an unfounded employment relationship. In this case, it is especially important that you find the reason for your termination. If there is indeed a reason, it is highly likely that you have already signed an agreement setting out the financial terms and benefits (if any) that will be provided to you upon termination. .