A severance package is money paid to an employee when they separate from their place of employment. While the Fair Labor Standards Act (FLSA) protects employees’ right to the minimum wage hourly rate, and overtime pay, there is no legal requirement that a company offers its employees severance pay. If you are entitled to severance pay, it will be because you entered into a legally binding agreement with the company you work for or because of their own policy.
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How is severance pay calculated?
Severance pay packages can be arranged in a number of ways, including a onetime payment, a series of payments, or being paid your salary for a number of months or set amount of time after you have left the company. Many employers calculate severance pay based on the amount of time the employee worked for the company and the salary of the employee who is leaving. The terms of your separation from the company may also factor into the severance pay package you receive. If you are terminated or laid off, but not because you did anything wrong you might receive a higher severance pay package than if you left voluntarily or were fired for wrongful actions on your part.
Another thing to keep in mind is the tax implications of your severance payment. If you receive one lump sum as a severance payment, this could have serious tax implications. The onetime paymentmight cause you to pay a higher rate depending on when you receive the severance pay.
If I get severance pay, will I be able to collect unemployment?
You may not be able to collect unemployment during the time that you are receiving severance pay, especially if you are being paid a severance package that includes your normal salary for a period of time, or until you find a new job.
What if I believe I am entitled to severance pay, but my employer has refused to give it to me?
Unpaid wages and unpaid, or underpaid overtime are violations of the FLSA. Under the FLSA, nonexempt employees must be paid for all work that they do and all of the time they work. Severance pay however is not paid for hours that the employee has worked, but is offered as a package once a person no longer works for the company. Thus, it is not protected under the FLSA.
You still may be entitled to severance pay, and your company’s failure to give that pay to you might be a legal violation. This would be the case if you have a contractual agreement specifying that you are to receive severance pay at the time of your separation from the company.
If you signed an employment contract, check to see if severance pay was a part of that contract, and what the terms of that contract were. If your employment contract, or another agreement made between you and your employer includes a provision for severance pay, then read it carefully. The severance pay might be something that you only receive under certain circumstances, such as a number of years working for the company, or if you are let go without fault on your part. If you believe you met all of the requirements for your severance agreement, and your employer is not agreeing to pay you, then your employer might be breaching their contract with you.
What should I do if my employer is in breach of contract?
If your employer has breached a contract with you by denying to pay you severance pay as you had both agreed they would in a legally binding agreement, such as an employment contract, then you have grounds for a claim against your employer for breach of contract. You should contact an attorney to discuss your claim and to ensure that your employer meets the terms of your agreement.
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