What is a severance package and what can it include?
There is no one meaning of an “appropriate severance package” because it also depends on the contract and company’s policies.
In addition to the compensation described above, a typical severance package includes the payoff for unused vacations and day-offs, as well as the following:
Extension of health insurance
In the US, employers must offer COBRA for terminated workers in any case. So that they can continue their insurance coverage. However, the company is no longer obliged to pay the premium, and the entire amount can fall on the ex-employee’s shoulders.
A lot of companies offer their workers to buy shares. But the employee becomes the stocks owner for a fixed term. Thus, a severance package may provide an opportunity to acquire ownership of the shares or sell them back to the company.
The possibility to keep a provided laptop or phone, employer-paid courses, or subscriptions may also be part of a compensation package.
Severance packages in tech: what giants promise to laid-off employees
Nearly 170,000 workers in the hi-tech sector received farewell messages from the companies in the first four months of 2023.
Google has promised its 12,000 dismissed colleagues a severance package with a payoff starting at 16 weeks’ salary plus 2 weeks for each additional year in the company. The corporation has also offered them 16 weeks of GSU vesting, 6 months of health insurance, and outplacement assistance.
Microsoft has laid off 10,000 people. The corporation has promised dismissed workers “above-market severance pay,” 6 months of health insurance, stock awards, and career assistance.
Zoom’s got rid of 15% of the staff and offers laid-off “zoomies” severance pay of up to 16 weeks’ salary and health insurance, RSU and stock options vesting, and outplacement help.
Сompanies also promise compensation in accordance with local legislation for workers outside the United States.
Severance pay in Germany
Only workers under the social plan in case of massive cuts are entitled to severance pay, How To Germany says. In reality, the parties agree on such compensation. Typically, this is half of the monthly salary for each year of work. However, it may differ by the deals.
Nevertheless, the employer must comply with the notice period, and if there is a works council, you should agree with it on any steps and payoffs.
Severance pay in Israel
In Israel, dismissed employees can have severance pay equal to one month’s earnings for each year of work, according to Altshuler. It includes all fixed allowances to the basic salary. However, additional benefits for convalescence, car, and telephone compensation do not count.
“Pitfalls” of severance pay and how to avoid them
As a rule, a company provides severance packages to avoid conflicts and potential lawsuits. However, if you work with an international team, you should be attentive to the nuances of local legislation. Laws may also vary from state to state in the US. So it is always better to work with qualified labor lawyers.
Outstaffing is another way to avoid compensation issues. You can terminate such cooperation after contract expires without any additional payments.
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