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Severance package

Severance package Definition

A severance package is pay and benefits an employee receives when they leave employment at a company. In addition to the employee's remaining regular pay, it may include some of the following:

  • An additional payment based on years of service
  • Payment for unused vacation time or sick leave.
  • A payment in lieu of a required notice period.
  • Medical, dental or life insurance
  • Retirement (e.g., 401K) benefits
  • Stock options
  • Assistance in searching for new work, such as access to employment services or help in producing a résumé.

Severance packages are most typically offered for employees who are laid off or retire. Sometimes, they may be offered for people who resign, regardless of the circumstances; or are fired. Policies for severance packages are often found in a company's employee handbook, and in many countries are subject to strict government regulation.

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