A severance package is pay and benefits employees receive when they leave employment at a company. In addition to their remaining regular pay, it may include some of the following:
- Any additional payment based on months of service
- Payment for unused accrued PTO vacation time Holiday pay or sick leave. In some states such as California, in order for a severance agreement to be valid, the severance pay offered must be more than just PTO, vacation, or holiday pay. Those benefits have to be "cashed out" when an employee leaves and must be provided regardless of whether or not an employee signs a severance agreement.
- A payment in lieu of a required notice period.
- Medical, dental or life insurance
- Retirement accounts (such as 401(k)) or 403(b) benefits
- Stock options
- Assistance in searching for new work, such as access to employment services or help in producing a résumé.
Packages are most typically offered for employees who are laid off or retire. Sometimes, they may be offered for those who either 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, they are subject to strict government regulation.
