Onboarding new workers is a complicated process. Employers need to recruit talent that meets the company’s needs, which can take months. The organization then has to negotiate terms regarding pay and benefits.
Particularly when workers have advanced skills or years of experience, they may expect to negotiate their compensation. In addition to requesting competitive wages and reasonable benefits packages, many white-collar professionals also expect a severance package.
Negotiating severance often occurs during the hiring process, which is easier to manage than addressing severance during a termination. Employers commit to certain terms to make transitions easier for workers after the end of an employment relationship. Companies need to ensure that they protect themselves during severance negotiations.
What steps limit legal and financial exposure in a severance agreement?
Terms limiting eligibility
Severance pay can take the sting out of a worker’s inclusion in a layoff or a targeted termination because they don’t quite fit the company’s needs. By providing benefits and wages for a set amount of time, the company can help that worker maintain a basic standard of living until they find a new position elsewhere.
That being said, there are scenarios in which the company may not want to provide severance pay to a worker. Frequently, severance agreements include provisions that allow companies to reduce or eliminate a severance package if they terminate a worker for cause. Disciplinary problems or performance issues can theoretically justify the decision to withhold severance pay from a professional.
Terms clarifying the severance provided
Some people have unrealistic expectations for severance pay. They expect to receive wages and benefits for six months or longer after exiting their position.
Companies need to provide clear terms in their contracts regarding the maximum amount of severance possible. Providing different terms for different scenarios based on the reason for the separation or the duration of the employment agreement can help the company limit its financial exposure.
Integrating the right terms into a severance agreement can help protect employers. Employment law matters can be challenging to address, and companies often need help ensuring they aren’t at risk of major financial setbacks or legal action brought by dissatisfied former employees. Companies that set clear expectations about severance early in a working relationship can minimize the risk of future conflict.
