A severance package is pay and benefits an employee receives when they leave employment at a company. In addition to the employee's remaining regular pay, it may include some of the following:
- An additional payment based on months of service
- Payment for unused vacation time or sick leave.
- A payment in lieu of a required notice period.
- Medical, dental or life insurance
- Retirement (e.g., 401K) benefits
- Stock options
- Assistance in searching for new work, such as access to employment services or help in producing a résumé.
Severance packages are most typically offered for employees who are laid off or retire. Sometimes, they may be offered for people who 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 are subject to strict government regulation. Severance contracts often stipulate that the employee will not sue the employer for wrongful termination or attempt to collect on unemployment insurance, and that if the employee does so, then he must return the severance money.
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