Severance payments

Is there a standard in determining severance pay when a group of employees will be displaced?  We have used one-week of pay for every year of service, with a four-week minimum, but I am hearing now that the standard is closer to two-weeks of pay for each year. 


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  • I can only speak from my experience and I have only seen one week per year but remember severance pay is not mandatory so however your company sets it up, you should be fine.  I am sure the employees would much prefer the two weeks per year.  How employee oriented is your company?
  • I do not think it is mandatory.  However, be careful that if you do it for one employee you are setting a precident for others and you wouldn't want to be accused on not handling all severances fairly and equally.   I recommend contacting your local DOL office, they can advise you on this.
  • CBedal is absolutely right that paying severance during a RIF isn't mandatory, however the issue of precendence is more important.  It's recommended that your company set a standard and offer that amount for all ee's impacted in this RIF.  I usually see a baseline of an amount equal to two weeks salary, plus one additional week for every year of service.  This does vary based on your industry and geographic location.  The long and short of it is you have to pay whatever amount will be incentive enough for employees to waive their rights and sign your Release of Claims in exchange for the severance $$. 
  • I was recently involved in writing a new policy and subsequently became a recipient of it. US DOL is very clear that severance pay is not required. Some states or government entities do have guidelines for mutually agreed upon payments, others like Ohio do not. Assuming that these layoffs are financially motivated, keep in mind that severance does not preclude the company's responsibility to pay unemployment even if it delays or mitigates those consequences. Your history, culture, commitment to employees, community good will, and ability to pay are all factors to consider when determining if and when severance is appropriate. Your current plan sounds reasonable as long as it is applied consistently across positions.
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