The pros and cons of severance packages

With the recent economic downturn, many companies are choosing to downsize. Whether that means budget cuts, expansion holdbacks, or large-scale layoffs, many employers are still struggling to stay afloat. If you have been the unfortunate victim of a company-wide layoff, your employer may be able to offer you a severance package. Although seemingly well-intentioned, some severance offers have drawbacks that you may not have considered.

What is a severance package?

For many employers, layoffs are an easy way to significantly reduce expenses. When they choose to go this route, employers can offer their recently “laid off” workers a check intended to supplement their income while they look for another job. The value of a severance package varies from company to company, as well as from employee to employee. Employers may consider the following circumstances when determining the amount of severance pay to offer:

• Level of pay/salary received prior to termination

• Length of employment

• Position in the company

• Performance

• And other relevant factors

It is important to remember that although you may feel you deserve severance pay, employers are not required to provide it in the event of termination.

advantage

The advantages of being offered a severance package are quite obvious. If you recently lost your job, any money you receive is to your advantage. These packages are often equal to, if not more than, a paycheck compensation. As you search for a new job, severance pay can help you maintain your lifestyle and provide for your family while you’re between jobs.

cons

The downsides of severance packages are a little less obvious. A common complaint from recently “laid off” employees is that the paperwork to obtain a severance check is tedious and lengthy. In many cases, processing the paperwork can delay your severance check for weeks or even months. While you’re looking for a job, every day matters. Being without income for a period of time can compromise your ability to keep up with your financial obligations. Also, accepting severance pay may disqualify you from receiving unemployment benefits.

Many employees are not aware that if they accept severance pay from their company, they are losing the right to file a lawsuit against their employer for wrongdoing.

For more information on whether or not you should accept your severance package, or for legal advice on filing a claim against your employer, contact the San Antonio employment attorneys at Melton & Kumler, LLP.