When is severance pay required

An employee who has been given a written notice of termination can resign and continue to keep the right to severance pay. To keep this right, the employee must give the employer two weeks' written notice of their resignation. The resignation must also take effect during the statutory notice period— the period of written notice that is required to be given by the employer.

If an employer provides longer notice than is required, the statutory part of the notice period is the last part of the period that ends on the date of termination.

Heather has worked for seven years, and is entitled to seven weeks' notice of termination under the ESA. Heather's employer gives her 10 weeks' notice. Heather must give her employer at least two weeks' written notice of her resignation. As long as Heather's resignation takes effect during the statutory notice period, in this case the last seven weeks of the week notice period, she continues to be entitled to severance pay.

The policy changed in response to a court decision. To calculate the amount of severance pay an employee is entitled to receive, multiply the employee's regular wages for a regular work week by the sum of:. The maximum amount of severance pay required to be paid under the ESA is 26 weeks.

Her employer gives Susan seven weeks' notice of termination, and Susan works for the notice period. At the end of the notice period, Susan's employment is severed.

On that date, Susan has been employed for seven years, nine months and two weeks. A special method of calculating severance pay is used for employees who are paid on a basis other than time worked. Kwesi works as a commission salesperson at his employer's high-tech retail store. Client service representative. Legal services for setting up, forming a company in Vietnam. User Accessed 2,, User Online 3. Tax on transferring profit, dividend incomes from Vietnam to foreign countries.

Licensing for employment service business in Vietnam. Conditions to ensure food safety for food traders in Vietnam. Some states require severance pay for factory workers who are laid off when a plant closes or in cases when an employer lays off a significant percentage of its workforce.

Employers may also be required to offer severance if stated in official company materials. Federally, in specific situations, a severance package may be offered in lieu of the day notice of a factory closing or mass layoffs required by the Worker Adjustment and Retraining Notification Act WARN.

A WARN notice is required whenever an organization with or more full-time employees lays off at least 50 workers at a single site. Even without a legal requirement, the Society for Human Resource Management SHRM notes that many employers choose to offer severance in order "to soften the blow of an involuntary termination and to avoid future lawsuits by having the employee sign a release in exchange for the severance.

So, what, exactly, should employers consider in a severance package? Unless a prior commitment was made to deliver specific post-employment compensation , severance packages are usually designed at the discretion of the employer. In other words, there is no set amount or percentage of severance pay, and an employer can offer any benefits they find suitable for a terminated employee. Common types of severance compensation include:. Share This Article:.

Is Severance Pay Legally Required? What is Severance Pay?