What is severance pay? Am I entitled to it?

Understanding Severance Pay for Departing Employees

What is severance pay? Am I entitled to it?

What is Severance Pay?

You may receive severance pay when you are terminated or otherwise separated from your employment. Severance pay is any sum of money your employer provides you upon separation. Some severance agreements also offer other benefits (e.g., health insurance) to employees  for some period of time after separation.

For example, suppose you are fired. Under the terms of your severance agreement, your employer pays you 6 months’ salary and allows you to keep your employer-provided health insurance for those 6 months. This agreement could make your life a lot easier by easing your transition from one job to the next. Talk to an employment attorney before signing a severance agreement, though, because the agreement might not be as helpful as it seems. Sometimes you have to give up some of your rights to accept the severance pay.

Am I entitled to severance pay?

A severance agreement is a contract between an employers and an employee. The Fair Labor Standards Act does not require employers to provide severance pay to their terminated employees. No other federal law or Pennsylvania law requires an employer to provide severance pay, either. Not every employee will have a severance agreement.

You are entitled to severance pay if a contract exists between you and your employer. An employer has a legal duty to pay you severance when he or she promises to do so in:

  • A written contract

OR

  • A verbal promise

You may also be entitled to severance pay if:

  • You employer has a history of giving employees severance pay

OR

  • Information about severance pay is included in your employee handbook

How is severance pay calculated?

Since severance agreements are contracts between employers and employees, they vary on a case-by-case basis. Some employers may offer severance pay for just one month. Others may offer severance pay for several weeks or even several months.

Factors influencing the amount of severance pay you might receive include:

  • Who your employer is
  • Which geographic location you work in
  • Industry norms

If you are negotiating with an employer to determine the amount of severance pay you will receive, make sure it is a reasonable amount. Also be sure that your agreement is in writing. This makes it much easier to enforce if your employer backs down from his or her promise. Any questions you have about severance agreements should be directed to an employment attorney.

Why wouldn’t I sign a severance agreement?

Signing a severance agreement can guarantee you pay, health insurance, and other benefits upon separation from your employer. You might be wondering why anyone would turn that down. The answer is this – severance agreements might include provisions that make it impossible for you to bring a legal claim against your employer.

A severance agreement might prevent you from:

  • Bringing a discrimination claim against your employer
  • Bringing a wage claim against your employer
  • Bringing a wrongful termination claim against your employer
  • Speaking negatively about your employer on any platform
  • Assisting attorneys who plan to bring a lawsuit against your employer

In addition, receiving severance pay may affect your ability to collect unemployment compensation benefits. Because of these reasons, it is extremely important to carefully consider your severance agreement before you agree to it. If you have any questions about severance, don’t hesitate to contact an employment attorney. The attorneys at KM&A represent clients across Pennsylvania. For a free and immediate consultation, call us at 412-626-5626 (western Pennsylvania) or 610-616-5686 (eastern Pennsylvania). We can also be reached by email at lawyer@lawkm.com.