Upon dismissal/termination, lay-offs or a mutual agreement to part ways, many individuals, especially senior executives, are entitled to severance pay.
Severance pay serves as compensation paid to a qualified employee who has his or her employment severed. You are not entitled to severance pay if you resign from your job. Those entitled to severance pay are compensated for losses that occurred when an employee was severed from his or her job.
For example, executives who may have served a company for a long period of time should be compensated for their loss of seniority. A severance package should not just include lost wages. Severance packages can be determined based on a pre-existing employment contract or by legislative minimums. Under various legislation, severance pay is calculated based on your years of employment and regular wages and benefits. That being said, the majority of employees who are dismissed are entitled to more severance than the statutory minimums. In assessing how much severance an individual is entitled to, courts consider the employee’s age, seniority, tenure, the availability of comparable work, and the employee’s training, qualifications and experience.
Once you reach the position of an executive, negotiating your compensation package is extremely important.