Why Companies Endorse Severance Pay

Any lawyer in New York will tell you that no company is required to provide employees with severance pay, unless there is a specific severance plan in place. As it stands, employers have the right to decide for themselves whether offering severance pay is in their best interest. However, it is estimated that approximately 60% of businesses have formal severance plans in effect as employers have come to see the benefits of such offerings. An employer may offer severance pay to secure the release of potential claims, attract future employees, raise employee morale and buffer mass layoffs, or reductions in force.

Attracting Future Employees

Offering a severance package is a great way to attract future employees. Severance pay is viewed as a respectable way to handle mass layoffs and manage their after-effects. While severance pay is considered an act of kindness on the part of the employer, you do have the right to negotiate greater compensation and benefits. However, keep in mind that in doing so you have effectively turned down your employer’s offer and may thereafter lose your entitlement to the package.

Severance pay is also used as a way to boost the morale of prospective employees and those that survived mass layoffs. Offering severance demonstrates compassion and conveys a high sense of job security. Showing employees that the company they work for cares for them is a great business strategy.

How Severance Pay Benefits You

After a company goes through mass layoffs, the affected employees must seek alternative employment. The money received under a severance package will supplement an employee’s unemployment compensation and serve as a buffer to support the employee’s accustomed standard of living. If you work for a company that offers a standardized severance package, study the contract to determine whether the provisions are fair. Remember that in signing a severance plan you are relinquishing any potential claims you have against your employer. The New York City severance attorneys at Fitapelli & Schaffer can review your agreement to ensure that the package you are receiving is reasonable.