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Q&A: What Kind of Severance Agreement Should We Offer?

How to determine pay when you let an employee go.

We are considering the dismissal of an employee, and would like to enter into a severance agreement with her. Do you have any guidelines on how much severance pay should be considered?

That's entirely up to you. There are no definitive standards. The amount of severance pay is often expressed in terms of a specified number of weeks of salary and benefits. It should be discussed openly with the employee, and a mutually acceptable number of weeks should be chosen. Higher paid employees will receive greater severance benefits because of their higher rate of pay. Other important factors to consider are:

1. Whether the employee is a member of a protected class under an applicable state or federal discrimination law. If so, be prepared to agree to a higher amount in order to avoid a possible discrimination claim under state or federal law that could result in a protracted legal dispute.

2. The ...

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Posted:
  • November 1, 2007

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