Severance pay is a financial compensation provided by an employer to an employee who is being terminated from their job, typically through no fault of their own. This type of pay is often given to employees who are laid off due to company downsizing, restructuring, or other economic reasons. Severance pay can help ease the transition for the employee by providing financial support while they search for a new job.
For example, if a company undergoes a major reorganization and decides to eliminate several positions, affected employees may receive severance pay based on their length of service, position, or salary. This compensation may include a lump sum payment or continuation of salary for a specified period.
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