Should You Pay Severance To Fired Employees?

Firing an employee is hard, and there are host of other decisions you can make to ease your former employee’s transition and reduce the risk to your company. The best way to avoid litigation is to pay severance for release the claims when you fire an employee. 

Clients often ask if they REALLY need to pay severance when the employee was fired for poor performance, no, you don’t have to pay severance but you probably want to. Why? Because a few of pay is a small price to pay to avoid tens of thousands of dollars in litigation costs. 

When the employee has done something wrong, like try to run over the company’s president, you probably won’t offer severance. But your usual standard should be: Severance for a Release of Claims. 

The million-dollar question is, how much severance? Sorry, but that calls for a lawyer’s answer. It depends, the employee must get more than she is entitled to for there to be a valid contract. Your policy requires the policy to pay out vacation benefits, he must be paid those benefits and something more. 

If there is a risk of company liability, you’ll want to pay more to settle, since the settlement will reflect the risk to the company from that claim. Also, listen to your employee, covering her insurance payments for six months may be more valuable to her than a month’s severance pay. 

Finally, if your employee had company property at home, the severance payment should also be contingent on getting that property back. If you are firing an employee and you want to offer her severance pay for release the claims against the company, make her transitions easier and reduce the risk to the company.