This policy outlines guidelines for providing severance pay and benefits for former employees. It defines acceptable grounds for offering (or withholding) severance packages and describes the requirements involved.

From the policy:

Employees part ways with organizations for a variety of reasons. Some of these reasons are simple: finding a job elsewhere, taking time off to spend with the family, or relocating to a different state. But some separations are more complex: a layoff due to company difficulties or reorganization, position elimination during a merger, or termination by the company for performance-related problems.

In simple departure scenarios, the employee is paid a final check for the time they worked and any unused vacation hours, then they part ways with the business. In more complex situations (generally when negative events occur that are outside the employee’s control), the company can provide a severance package to departing employees, which may include pay, benefits, and services provided for a certain amount of time after the employment has ended.

Normally, companies are required to pay wages to employees only for time they worked or that they are entitled to, such as accrued vacation hours (not sick days). No law requires employers to provide severance pay unless a contract specifically states otherwise or if the company conducts a large-scale employee layoff without providing 60 days’ advanced notice.

However, providing severance pay to a departing employee can be both a supportive action to help former workers and a morale boost for existing employees, who will recognize that the organization is committed to the best interests of its workers, whether past or present.