Severance pay is a benefit offered by many employers when involuntarily terminating the employment of an employee.

There is no legal obligation under the federal Fair Labor Standards Act or any other alternative federal law to provide severance pay to terminated employees. However, many unionized employers may be obligated to provide severance pay benefits under the terms of a collective bargaining agreement, and some non-unionized employers may be obligated to do so in accordance with any relevant state or local law provisions.

Severance agreements providing for a release of claims under the Age Discrimination in Employment Act (ADEA) must comply with several specific requirements of the Older Workers Benefit Protection Act (OWBPA) for such a release to be legally enforceable.

Severance plans other than ad hoc severance agreements must comply with ERISA, as do other welfare benefit plans and defined benefit and defined contribution pension plans.

Apart from situations where severance pay is mandated by a collective bargaining agreement or state law, ERISA severance plans are implemented mostly by larger organizations. Smaller employers tend to prefer to handle severance pay on an ad hoc basis. Employees who have previously been employed by large organizations are often shocked to discover, upon involuntary termination, that they are not entitled to “two weeks of severance pay.”

Read the rest of the toolkit: Designing and Administering Severance Pay Plans SHRM Toolkit

Severance: To Pay or Not To Pay Sills Cummis | Jul 2020

More Organizations Are Expanding Severance Benefits, Survey Finds SHRM | Jun 2019

Severance Tied to Tenure and Position as Formal Policies Decline SHRM | Mar 2018

Tread Carefully Across the Severance Minefield SHRM | May 2017

HR Lessons from Bill O'Reilly's $25 Million Severance Deal SHRM | Apr 2017

Practices/Trends Data Some or all of the following resources may be available on a fee-only basis and/or require download after completion of a brief form. Before making a purchase, confirm with the vendor that the survey contains the type of data you seek.

2020 Survey of Severance & Separation Benefits Results Compensation Resources

Severance & Separation Benefits Survey (2020) Lee Hecht Harrison

Guide to Severance and Workforce Transition (2021) Infographic RiseSmart

2022 Severance Policies and Practices Report - U.S. Global Severance Policies and Practices Survey Report (2020) WTW

2021 Study of Executive Severance Arrangements Not Related to a Change in Control Comprehensive Study on Executive Change-in-Control Arrangements (2020) Market Trends in Change-in-Control Severance Arrangements - article Meridian Compensation Partners

Severance Agreements

NLRB Limits Nondisparagement Requirements in Severance Agreements SHRM | Feb 2023

Employers May Need to Update Their Severance Agreement Templates by April 1 Baker Hostetler | Mar 2021

Ripping off the Band-Aid: Considerations for Negotiating Employee Severance Obermayer | Apr 2019

PODCAST: Dos and Don'ts for Drafting Severance Agreements Ogletree Deakins | Aug 2018

VIDEO: Protect Your Company from Employee Backlash with Severance Agreements McNees Wallace & Nurick | Jul 2018

Conditioning Severance on Post Employment Obligations: Tricky Business Akerman | Jun 2018

Employers Should Be Aware of Pitfalls When Entering into Severance Agreements Nexsen Pruet | Jul 2017

Getting More Bang for Your Buck With Separation and Settlement Agreements Bryan Cave | Apr 2017

“Breaking Up Is Hard To Do”: But a Good Separation Agreement Can Ease the Pain DLA Piper | Feb 2017

Employment is Now-But is a Separation Agreement Still Forever? Stearns Weaver Miller | Oct 2016

SEC Cracks Down on Waivers in Severance Agreements SHRM | Aug 2016

Understanding Waivers of Discrimination Claims in Employee Severance Agreements EEOC

ERISA

Podcast: Severance Pay Plans & ERISA Proskauer | Feb 2018

Contemplating a Severance Plan? Consider ERISA Snell & Wilmer | Jun 2017

Does Your Severance Trigger ERISA? Why You Should Care and What You Should Do Foley & Lardner | Jul 2016

Tax Issues Severance Agreements – Three Tax Traps for the Unwary Foley & Lardner | Jun 2017

Here's How IRS Taxes Severance Pay Forbes | Sep 2017

Sample Policies and Forms

Severance Pay Policy SHRM

Reduction in Force Policy: Selection and Severance Pay SHRM

Severance Pay Policy New York University

Staff Severance Program Policy The Ohio State University

Severance Pay University of Hartford

Older Worker Act Waiver SHRM