Definition & Meaning:

When a company wants to lay off an employee, they often give the employee things to make losing their job seem more acceptable.

One of the thing they offer to give the soon to be ex-employee is 'severance pay'. This is money that includes a payment for outstanding days of holiday and bonuses etc... In addition to 'severance pay', they can also be offered others things or the continuation of benefits. These can include:

  • Continuation of private pension
  • Continuation of private health insurance
  • Share/Stock options

This combination of money and things that a person receives when they lose their job is called a 'severance package'.

What is included in a 'severance package' (both money and things) depends on mainly on the company and the employee who is being offered it.

Normally, only people who are being laid off or made redundant by a company are offered a 'severance package'. Also, this is generally only given to senior management in a company. Most employees are only given 'severance pay' when they are laid off.

People who are fired/sacked for personal misconduct, or have worked at the company for less than a year or resign by their choice don't normally receive a 'severance package'.

Depending on both the company and country (or state), the 'severance package' may also include certain conditions that the employee has to be abide by if they accept it (e.g. not to work for a competitor, take legal action against the company, share information about the company etc...).

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Also Called:

Redundancy Package, Termination Package.

Related Vocabulary:

Severance Pay, Relocation Package, Time Off in Lieu.

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