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What issues must you anticipate with an employee severance package?

When you first became a business owner, the farthest thing on your mind was laying off or otherwise terminating employees. You expect to offer a severance package for the first time in the days to come, and you want to cover all your legal bases and do right by your workers. 

Forbes dives into common issues surrounding severance packages. Anticipate potential areas of conflict to take a proactive approach to conflict resolution. 

Severance pay  

Employees want to receive a fair severance pay. When deciding on this amount, consult individual employment agreements and company policy to see if you must offer severance pay. Departing employees may want higher pay, and they may prefer a lump payment rather than incremental payments over several months. Consider federal and state tax implications when finalizing this part of the package. 

Medical benefits 

You may have a legal obligation to continue providing a terminated employee with medical benefits for up to 18 months after termination. If you do, the employee must cover the cost of premiums. If the worker has more than medical coverage as part of a benefits package, she or he may request that those benefits continue, too. 

Vacation time  

Account for unpaid paid time off and vacation pay departing employees accrued. Consult your company’s employee handbook to see if you already covered this aspect of severance agreements. 

References 

You may have no problem providing a reference for employees departing on good terms. A worker may request that you write a positive recommendation letter as part of the severance agreement. 

Severance agreements help employees start the next chapter of their professional lives on the right foot. Do your part to give them a proper send-off. 

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