When employment is severed, an employee might receive a form of compensation known as severance pay. This compensates for the additional losses when long-term employees lose their job. There are many misconceptions about what fair severance is.
If this is your first time receiving severance pay or a severance package, you may be wondering how much and what you are legally entitled to compare to what you’ve been given. Here is how to know if your severance is fair.
1. Qualifying for Severance
An employee must qualify for severance pay if they are indeed looking to test whether the compensation received is fair or not. To quality, an employee must have worked a minimum of five years with an employer, whether continuous or not.
The employer must also have severed the employment of a minimum of 50 employees in the last six months as a part of the business closing or a global payroll of a minimum of $2.5 million.
2. Your Employment Contract
Some employers try to limit severance owed through a termination clause in the employment contract. Although you’ve signed the contract, that doesn’t mean this clause is enforceable. Before you sign a severance offer or if you feel like you are being bullied into accepting a package containing less than what you may be legally owed, this is where employment lawyers can advise you.
3. Why An Employer May Bully You
There is power in having an employment lawyer negotiate on your behalf a fair severance package because some employers will try to push you in a termination meeting to accept a severance offer right then and there. Their goal is to stop you from seeking legal help and accept less than they are legally required to provide you.
Please note, it is illegal for an employer to force you to accept a severance package. They cannot do it.
4. An Employer-Provided Deadline
An employer may offer you a severance package and state, “Sign by Friday, or it’s off the table.” A deadline like this is another pressure tactic. It’s almost always a sure sign that an employer’s offering you less than what they should. You don’t have to follow these deadlines. They don’t negate what you are legally owed, and you are not required to sign a thing.
That said, if you do agree and sign without having a lawyer examine it, you could be forfeiting a portion of your entitlement.
5. How Severance Is Calculated
A simple test of whether your severance is fair is to calculate it. The formula is to multiple an employee’s regular wages for a regular workweek by the sum of the number of years of employment and months of employment. The maximum severance pay that’s required to be paid is 26 weeks. An employer can offer you more severance, but the legal minimums are required.
6. How Much You Are Owed Depends
How much a non-unionized employee is owed in severance varies according to the length of employment, age, job title and position, availability of employment, and whether there were specialized skills utilized during your job.
Severance is a system designed to offer financial assistance in the interim between your former job and your next job, and this is why things like availability of work and age have a role to play.
7. Severance Is Not All About Pay
If you use a lawyer to negotiate your severance package, you stand a better chance at having the money owed to you and other perks that a company may offer. Continuing existing insurance benefits and other favourable terms can provide you with peace of mind as you move from one job to the next. Sadly, many people end up accepting severance that is thousands of dollars less than what they are rightfully owed.
8. When You Are Not Owed Severance
The only time you are not owed any severance if you are a qualifying employee is if your employer has let you go with just cause. ‘Just cause’ is difficult to establish legally. An employer must prove you’ve done something that would make it impossible for them to continue to employ you.
Even if you’ve done something wrong or incorrect at work, it doesn’t necessarily establish just cause, which is why severance pay is still provided to many high-profile dismissals even when wrongdoing’s been done.
9. When To Hire An Employment Lawyer
An employer has the right to dismiss an employee for any reason they see fit, so long as it isn’t discrimination. An employee can’t argue for their job back. However, a dismissed employee is owed severance. If an employer is firing you without offering any compensation or you believe their severance offer is too low, this could be a case of wrongful dismissal. An employment lawyer should be consulted immediately.