One of the more pleasant forms of termination is the contract "buy-out"-fulfilling of all employer contractual obligations (including payment for the entire contract period) in advance of the expiration date. This can happen when the costs, including non-monetary, of keeping the other party to the contract are greater than the costs of the buy-out. However, this is not what is conventionally denoted by "termination pay". Rather, the latter designates payment as a result of termination, instead of payment as an inducement for termination.
"Pay", in the strict sense, is separate from other components of a severance "package", which can comprise a broad array of benefits. The "money component" can include
* Severance pay based on terms of service
* Commission, bonus and deferred compensation payouts due
* Rights under pension, profit sharing and 401(k) or RRSP plans
* Stock option statement and exercise schedules
* Restricted stock and acceleration schedules
* Loan Repayment terms
* Un-reimbursed business expenses
In offering or accepting termination pay, in either the strict sense of money payment upon dismissal, or as part of a severance package, great care must be taken to ensure that neither the dismissal nor the severance (agreement) contravenes any laws, regulations or policies.
Termination pay, also known as severance payment, is part of a severance package provided by a company to a dismissed worker. Termination pay may be given to or mandatory for an employee when he or she is laid off, depending on the policies, laws and regulations prevailing at a company or within a jurisdiction. However, being fired or resigning makes severance packages much less likely, where not altogether impossible.
Termination pay is in many jurisdictions and circumstances not mandatory, but for the sake of fair labor standards, contractual compliance or even compassion, an employers may provide it. Such financial packages may include cash equivalents for sick leave and vacations that were not taken by the employee. In addition, there may be an extra sum of money awarded for the months or years of service rendered by the employee on a prorated, cumulative basis. The compensation can include extended medical and life insurance packages if they are supplied by the organization.
The ramifications and consequences of accepting termination pay may include an impact on eligibility for unemployment benefits, especially if the severance package includes pay for a period well beyond the last day of formal employment. Another consideration is any obligation to comply with prior confidentiality or non-compete agreements. This can create a legal tangle of questions if the employer disbursement of termination monies is made contingent on acceptance of extended versions of such agreements. If the original employment contract did not specify the continued enforceability of such agreements after termination, requiring post-employment confidentiality and non-compete performance may be problematic. Always seek professional legal advice when faced with the prospect of this issue or any termination question.
Termination pay can also be claimed by an employee who terminates his or her contract with proper notice. In such cases, employers are bound to complete payment for the notice period served by the employee. If an employee is redundant, (s)he can try to negotiate extra benefits and additional money from the employer.
Many organizations and employers prefer to offer termination pay to avoid lawsuits from ex-employees who would otherwise receive nothing. Moreover, provision of termination pay and other compensation is a good way to part company cordially and leave the door open to any mutually beneficial future collaboration with the employee.
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