Exterior of the Office Building of Sagaser, Watkins & Wieland PC

Should you offer employees severance pay when they’re terminated?

On Behalf of | Sep 16, 2021 | Employment Law

It’s always difficult to let an employee go — particularly when they’ve been with the company for a while. Unfortunately, it’s bound to happen, whether that’s due to downsizing, restructuring or simply poor performance on the employee’s part.

Why should you offer an employee in this position a severance package? Here’s what you should consider:

You may actually owe your employee a severance

Generally, employees aren’t guaranteed a severance package — unless you have a contract that says otherwise.

To determine your obligation, you need to consider:

  • Any oral promises made by your executive officers or management
  • Any promises made (or implied) in the employee handbook about severance 
  • What the employment contract specific to this employee says about severance entitlements

You also need to consider what you’ve done in the past. If you “made an exception” for a few employees in the past and gave them a severance package, you may have set a precedent that now applies to any employee in a similar position.

You may want to offer a severance package in exchange for a deal

There can be a lot of hostility when employees aren’t leaving on their own terms — and that can ultimately translate into actions that are harmful to your company’s interests. You can trade a severance package for an agreement that protects your business.

It’s not uncommon for employers to offer severance packages in exchange for things like an employee agreeing not to:

  • Sue for wrongful termination or discrimination
  • Discuss the company’s business operations, trade secrets or plans
  • Disparage the company in any way in the media or to others in the field

Employers have to make difficult decisions all the time, and deciding when to offer a severance package is just one of them. Learning more about your options can help you decide how to best proceed.