severance pay

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Severance pay is a fee paid to an employee after an involuntary termination. In most circumstances, severance pay is not required, but employers promise severance pay as a way to attract workers. If an employer offers severance pay, the terms will normally be agreed upon in the employment contract and will vary based on experience and years of employment. In a few cases, severance pay can be mandated by state or federal law such as the Worker Adjustment and Retraining Notification Act (WARN) which requires certain employers to give severance pay or give 60 days notice. 

[Last updated in July of 2021 by the Wex Definitions Team