What Is In A New York Severance Package?
We get a lot of questions about severance packages. People want to know what is in one and how much money they should contain. New York severance packages vary from company to company and there is no set formula to determine their value. Most severance packages in NY, however, usually contain some or all of the following:
1. Severance Pay
Severance pay is an amount that the company has decided to pay a departing employee. I can be paid in a lump sum or paid out over time. Some companies use rough formulas to determine severance pay and they range from one weeks pay for each year of employment to a months pay for each year of service or more. Or the amount may not be linked to the length of employment. Typically higher ranking company officers receive more money than lower ranking employees. Some top level executives even have their severance pay determined in advance in their employment agreements. There is no legal formula that must be followed and there is no rule requiring the payment of any severance.
2. Separation Agreement
This is a contract that sets out the terms of an employee’s separation from the company. It will typically explain the amount of severance pay, the end date of employment and any obligations that the employee owes to the company such as a promise not to compete or steal clients or customers for a set time. The agreement will usually contain a waiver of any rights including the ability to file a law suit against the company for anything. Employees, of course, are not required to agree to any of these terms but the employee will usually not receive their severance pay unless they sign the agreement.
3. Outplacement Services
Many companies provide outplacement services as part of a severance package. I have never seen much value in these services and usually ask companies to pay our clients more money in lieu of these services. Some employees, however, find that these services are helpful.
4. Health Insurance
Health benefits usually end on an employee’s last day of employment. Some companies will provide departing employees with a period of paid health insurance coverage as part of severance package. Most employers are required under COBRA to provide employees with the option of paying for their own health insurance at the company rate for 18 months. COBRA notices are not usually part of a severance package.
5. Vacation Pay
Depending on a companies policy, an employee may receive a check for any unused vacation pay and floating holidays.
6. Stock Options or Company Equity
A severance package will usually explain the value and payment terms of any equity interest owned by the employee.